CITIUS ONCOLOGY, INC. 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: March 31, 2026 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to ______________ Commission File Number 001-41534 Citius Oncology, Inc. (Exact name of registrant as specified in its charter) Delaware 99-4362660 ( State or other jurisdiction of incorporation or organization ) ( IRS Employer Identification No. ) 11 Commerce Drive , First Floor , Cranford , NJ 07016 ( Address of principal executive offices ) ( Zip Code ) (908) 967-6677 ( Registrant’s telephone number, including area code ) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Trading Symbol(s) Name of Each Exchange on Which Registered Common stock, $0.0001 par value CTOR Nasdaq Capital Market Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☒ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ As of May 14, 2026, there were 92,981,204 shares of common stock, $0.0001 par value, of the registrant issued and outstanding. Citius Oncology, Inc. FORM 10-Q TABLE OF CONTENTS March 31, 2026 Page PART I. FINANCIAL INFORMATION: 1 Item 1. Financial Statements (Unaudited) 1 Condensed Consolidated Balance Sheets at March 31, 2026 and September 30, 2025 1 Condensed Consolidated Statements of Operations for the Three and Six Months Ended March 31, 2026 and 2025 2 Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended March 31, 2026 and 2025 3 Condensed Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2026 and 2025 4 Notes to Condensed Consolidated Financial Statements 5 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 17 Item 3. Quantitative and Qualitative Disclosures about Market Risk 26 Item 4. Controls and Procedures 26 PART II. OTHER INFORMATION 27 Item 1. Legal Proceedings 27 Item 1A. Risk Factors 27 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 27 Item 3. Defaults Upon Senior Securities 27 Item 4. Mine Safety Disclosures 27 Item 5. Other Information 27 Item 6. Exhibits 28 SIGNATURES 29 i EXPLANATORY NOTE In this Quarterly Report on Form 10-Q, and unless the context otherwise requires, the “Company,” “Citius Oncology,” “we,” “us,” and “our” refer to Citius Oncology, Inc. and its wholly-owned subsidiary Citius Oncology Sub Inc. (“Citius Oncology Sub”) taken as a whole. LYMPHIR TM (denileukin diftitox) is our registered trademark. All other trade names, trademarks and service marks appearing in this quarterly report are the property of their respective owners. We have assumed that the reader understands that all such terms are source-indicating. Accordingly, such terms, when first mentioned in this report, appear with the trade name, trademark or service mark notice and then throughout the remainder of this report without trade name, trademark or service mark notices for convenience only and should not be construed as being used in a descriptive or generic sense. ii CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains “forward-looking statements.” Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and are likely to, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors discussed from time to time in this Report and in other documents which we file with the Securities and Exchange Commission (the “SEC”). In addition, such statements could be affected by risks and uncertainties related to: ● our independent registered public accounting firm’s report includes an explanatory paragraph stating that there is substantial doubt about our ability to continue as a going concern; ● our need for substantial additional funds and our ability to raise those funds; ● our ongoing evaluation of strategic alternatives; ● our ability to successfully commercialize LYMPHIR, including covering the costs of licensing payments, product manufacturing and other third-party goods and services; ● our ability to regain compliance with the continued listing requirements of the Nasdaq Stock Market LLC (“Nasdaq”); ● the ability of LYMPHIR or any of our future product candidates to impact the quality of life of our target patient populations; ● the estimated markets for LYMPHIR or any of our future product candidates and the acceptance thereof by any market; ● our ability to recognize the anticipated benefits of the August 2024 reverse merger whereby we became a standalone publicly-traded company and majority-owned subsidiary of Citius Pharmaceuticals, Inc. (“Citius Pharma”), which may not be realized fully, if at all, or may take longer to realize than expected; ● our ability to procure cGMP commercial-scale supply; ● our ability to obtain, perform under and maintain financing and strategic agreements and relationships; ● our ability to manage and grow our business and execution of our business and growth strategies; ● our ability to recruit and retain qualified management and technical personnel to carry out our operations; and ● the other factors discussed in the “Risk Factors” section of our most recent Annual Report on Form 10-K for the fiscal year ended September 30, 2025, filed with the SEC on December 23, 2025. Any forward-looking statements speak only as of the date on which they are made, and except as may be required under applicable securities laws, we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the filing date of this Report. iii PART I - FINANCIAL INFORMATION Item 1. Financial Statements. CITIUS ONCOLOGY, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) March 31, 2026 September 30, 2025 Current Assets: Cash and cash equivalents $ 2,632,634 $ 3,924,908 Accounts receivable, net of allowances 1,079,055 — Inventory 22,659,590 22,286,693 Prepaid expenses 3,052,387 1,331,280 Total Current Assets 29,423,666 27,542,881 Other Assets: In-process research and development, net of accumulated amortization 71,106,250 73,400,000 Deferred financing costs 169,252 — Total Other Assets 71,275,502 73,400,000 Total Assets $ 100,699,168 $ 100,942,881 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts payable $ 8,883,239 $ 13,234,684 License payable 17,650,000 22,650,000 Accrued expenses 24,057,573 4,093,124 Due to related party 8,221,486 9,513,771 Total Current Liabilities 58,812,298 49,491,579 Deferred tax liability 2,817,990 2,784,960 Note payable to related party 3,800,111 3,800,111 Total Liabilities 65,430,399 56,076,650 Stockholders’ Equity: Preferred stock - $ 0.0001 par value; 10,000,000 shares authorized: no shares issued and outstanding — — Common stock - $ 0.0001 par value; 400,000,000 shares authorized at March 31, 2026 and September 30, 2025; 92,981,204 and 83,513,442 shares issued and outstanding at March 31, 2026 and September 30, 2025, respectively 9,298 8,351 Additional paid-in capital 131,443,191 108,897,836 Accumulated deficit ( 96,183,720 ) ( 64,039,956 ) Total Stockholders’ Equity 35,268,769 44,866,231 Total Liabilities and Stockholders’ Equity $ 100,699,168 $ 100,942,881 See notes to unaudited condensed consolidated financial statements. 1 CITIUS ONCOLOGY, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND Six Months Ended March 31, 2026 and 2025 (Unaudited) Three Months Ended Six Months Ended March 31, March 31, March 31, March 31, 2026 2025 2026 2025 Revenues $ 1,667,298 $ — $ 5,611,409 $ — Cost of revenues ( 328,878 ) — ( 1,118,086 ) — Gross Profit 1,338,420 — 4,493,323 — Operating Expenses Research and development 1,079,354 3,139,413 2,097,706 4,403,921 Amortization of in-process research and development 1,720,312 — 2,293,750 — General and administrative 23,625,639 2,243,327 26,484,978 5,565,306 Stock-based compensation – general and administrative 3,526,710 2,088,572 7,482,760 3,897,050 Total Operating Expenses 29,952,015 7,471,312 38,359,194 13,866,277 Operating Loss ( 28,613,595 ) ( 7,471,312 ) ( 33,865,871 ) ( 13,866,277 ) Other Income (Expense) Interest income 43,721 — 72,009 — Gain on sale of New Jersey net operating losses 1,762,000 — 1,762,000 — Interest expense ( 33,031 ) — ( 78,872 ) — Total Other Income, Net 1,772,690 — 1,755,137 — Loss before Income Taxes ( 26,840,905 ) ( 7,471,312 ) ( 32,110,734 ) ( 13,866,277 ) Income tax expense (benefit) ( 231,210 ) 264,240 33,030 528,480 Net Loss $ ( 26,609,695 ) $ ( 7,735,552 ) $ ( 32,143,764 ) $ ( 14,394,757 ) Net Loss Per Share - Basic and Diluted $ ( 0.27 ) $ ( 0.11 ) $ ( 0.34 ) $ ( 0.20 ) Weighted Average Common Shares Outstanding Basic and diluted (includes pre-funded warrants from the December 2025 offering) 100,027,204 71,552,402 93,657,757 71,552,402 See notes to unaudited condensed consolidated financial statements. 2 CITIUS ONCOLOGY, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE THREE AND Six Months Ended March 31, 2026 and 2025 (Unaudited) Preferred Stock Common Stock Additional Paid-In Accumulated Total Stockholders’ Shares Amount Shares Amount Capital Deficit Equity Balance, September 30, 2025 - $ - 83,513,442 $ 8,351 $ 108,897,836 $ ( 64,039,956 ) $ 44,866,231 December 2025 sale of common stock and pre-funded warrants, net of costs of $ 2,872,989 - - 1,284,404 129 15,125,360 - 15,125,489 Stock-based compensation expense - - - - 3,956,050 - 3,956,050 Net loss - - - - - ( 5,534,069 ) ( 5,534,069 ) Balance, December 31, 2025 - - 84,797,846 8,480 127,979,246 ( 69,574,025 ) 58,413,701 Proceeds from exercise of pre-funded warrants - - 8,183,358 818 - - 818 December 2025 offering costs - - - - ( 62,765 ) - ( 62,765 ) Stock-based compensation expense - - - - 3,526,710 - 3,526,710 Net loss - - - - - ( 26,609,695 ) ( 26,609,695 ) Balance March 31, 2026 - $ - 92,981,204 $ 9,298 $ 131,443,191 $ ( 96,183,720 ) $ 35,268,769 Balance, September 30, 2024 - $ - 71,552,402 $ 7,155 $ 85,411,771 $ ( 39,278,587 ) $ 46,140,339 Stock-based compensation expense - - - - 1,808,478 - 1,808,478 Net loss - - - - - ( 6,659,205 ) ( 6,659,205 ) Balance, December 31, 2024 - - 71,552,402 7,155 87,220,249 ( 45,937,792 ) 41,289,612 Stock-based compensation expense - - - - 2,088,572 - 2,088,572 Net loss - - - - - ( 7,735,552 ) ( 7,735,552 ) Balance, March 31, 2025 - $ - 71,552,402 $ 7,155 $ 89,308,821 $ ( 53,673,344 ) $ 35,642,632 See notes to unaudited condensed consolidated financial statements. 3 CITIUS ONCOLOGY, INC. Condensed Consolidated STATEMENTS OF CASH FLOWS FOR THE Six Months Ended March 31, 2026 and 2025 (Unaudited) 2026 2025 Cash Flows From Operating Activities: Net loss $ ( 32,143,764 ) $ ( 14,394,757 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation expense 7,482,760 3,897,050 Amortization of in-process research and development 2,293,750 - Deferred income tax expense 33,030 528,480 Changes in operating assets and liabilities: Accounts receivable, net of allowances ( 1,079,055 ) - Inventory ( 372,897 ) ( 7,070,487 ) Prepaid expenses ( 1,721,107 ) - Accounts payable ( 4,351,445 ) 3,964,688 Accrued expenses 19,964,449 8,722,168 Due to related party ( 1,292,285 ) 4,352,858 Net Cash (Used In) Provided By Operating Activities ( 11,186,564 ) - Cash Flows From Investing Activities License payments ( 5,000,000 ) - Net Cash Used In Investing Activities ( 5,000,000 ) - Cash Flows From Financing Activities Deferred financing costs ( 169,252 ) - Net proceeds from issuance of common stock 15,063,542 - Net Cash Provided by Financing Activities 14,894,290 - Net Change in Cash and Cash Equivalents ( 1,292,274 ) - Cash and Cash Equivalents – Beginning of Period 3,924,908 112 Cash and Cash Equivalents – End of Period $ 2,632,634 $ 112 Supplemental Disclosures of Cash Flow Information and Non-cash Transactions: Interest Paid $ 14,460 $ - See notes to unaudited condensed consolidated financial statements. 4 CITIUS ONCOLOGY, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE Six Months Ended March 31, 2026 and 2025 (Unaudited) 1. NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business Citius Oncology, Inc. (“Citius Oncology”, the “Company”, “we” or “us”) is a specialty pharmaceutical company dedicated to the development and commercialization of critical care products targeting unmet needs with a focus on oncology products. We have developed E7777 (denileukin diftitox), an approved oncology immunotherapy for the treatment of cutaneous T-cell lymphoma (“CTCL”), a rare form of non-Hodgkin lymphoma. We have obtained the trade name of LYMPHIR for E7777. Revenue commenced in December 2025 with the commercial launch of LYMPHIR. Since our inception, we have devoted substantially all our efforts to business planning, research and development, and recruiting management and technical staff. We are subject to a number of risks common to companies in the pharmaceutical industry including, but not limited to, the Company’s ability to obtain additional financing, risks related to the development by the Company or its competitors of research and development stage products, market acceptance of any of its products approved for marketing, competition from larger companies, dependence on key personnel, dependence on key suppliers and strategic partners and the Company’s compliance with governmental and other regulations. Since our inception, Citius Pharmaceuticals, Inc. (“Citius Pharma”) (Nasdaq: CTXR) has funded and continues to partially fund the Company. Citius Pharma and the Company are party to an amended and restated shared services agreement (the “A&R Shared Services Agreement”), which governs certain management and scientific services that Citius Pharma provides the Company. Merger On August 23, 2021, Citius Pharma formed Citius Acquisition Corp. (“SpinCo”) as a wholly-owned subsidiary in conjunction with the acquisition of LYMPHIR, which began operations in April 2022, when Citius Pharma transferred the assets related to LYMPHIR to SpinCo, including the related license agreement and asset purchase agreement (see Note 7). On October 23, 2023, Citius Pharma and SpinCo entered into an agreement and plan of merger and reorganization (the “Merger Agreement”) with TenX Keane Acquisition, a Cayman Islands exempted company (“TenX”), and TenX Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of TenX (“Merger Sub”). On August 12, 2024, pursuant to the terms and conditions of the Merger Agreement, Merger Sub merged with and into SpinCo, with SpinCo surviving as a wholly owned subsidiary of TenX (the “Merger”) which was subsequently renamed Citius Oncology Sub, Inc. Prior to closing of the Merger, TenX migrated to and domesticated as a Delaware corporation in accordance with Section 388 of the General Corporation Law of the State of Delaware and the Cayman Islands Companies Act (As Revised) (the “Domestication”). As part of the Domestication, TenX changed its name to “Citius Oncology, Inc.” (Nasdaq: CTOR). Immediately after the closing of the Merger, Citius Pharma owned approximately 92 % of the outstanding shares of common stock of the Company. As of March 31, 2026, Citius Pharma owned approximately 71 % 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 SpinCo became the historical financial statements of the Company. 5 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 10). Basis of Presentation and Summary of Significant Accounting Policies Basis of Preparation - The accompanying unaudited condensed 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. All significant inter-company balances and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements of the Company have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to fairly state the condensed consolidated financial position of the Company as of March 31, 2026, and the results of its operations and cash flows for the three and six months ended March 31, 2026 and 2025. The operating results for the three and six months ended March 31, 2026 are not necessarily indicative of the results that may be expected for the year ending September 30, 2026. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2025 filed with the Securities and Exchange Commission (“SEC”) on December 23, 2025. 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 revenue recognition, in-process research and development, stock-based compensation, net realizable value of inventory and income taxes. Actual results could differ from those estimates and changes in estimates may occur. Basic and Diluted Net Loss per Common Share - Basic and diluted net loss per common share applicable to common stockholders is computed by dividing net loss applicable to common stockholders in each period by the weighted average number of shares of common stock outstanding during such period. For the periods presented, common stock equivalents, consisting of stock options and warrants, were not included in the calculation of the diluted loss per share because they were anti-dilutive, with pre-funded warrants being included in the loss per share. Recently Issued Accounting Standards Other than as disclosed in our Form 10-K, we are not aware of any other recently issued accounting standards not yet adopted that may have a material impact on our financial statements. 2. GOING CONCERN UNCERTAINTY AND MANAGEMENT’S PLAN The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company had a net loss of $ 32,143,764 for the six months ended March 31, 2026. The Company has generated limited revenue, which commenced in December 2025, and has historically relied primarily on funding from Citius Pharma to finance its operations. At March 31, 2026, the Company had $ 2,632,634 in cash and a negative working capital of $ 29.4 million. 6 On May 5, 2026, Citius Oncology received gross proceeds of approximately $ 11.5 million from the exercise of certain warrants (See Note 12). In addition, the Company entered into a loan agreement for up to $ 25.0 million, with $ 10.0 million funded on May 6, 2026, up to $ 7.0 million available on the later of (A) the date on which certain net revenue and liquidity milestones are achieved and (B) October 1, 2026, and continuing through December 31, 2026, and up to $ 8.0 million available beginning on the later of (A) the date on which certain additional net revenue milestones are achieved and (B) January 1, 2027, and continuing through March 31, 2027. The loans bear interest at the greater of the prime rate plus 6 % or 12.75 %. The Loans are secured by an interest in all of the Company’s assets, including intellectual property, subject to agreed exceptions. The maturity date of the Loans is November 1, 2029 (See Note 12). We expect that we and Citius Pharma collectively will have sufficient funds to continue our operations through November 2026. We will need to raise additional capital to support our operations beyond November 2026, which raises substantial doubt about our ability to continue as a going concern within one year after the date that the accompanying financial statements are issued. The Company plans to continue to rely partially on funding from Citius Pharma, to raise capital through equity and debt. financings and to generate revenue from sales of LYMPHIR. Both the Company and Citius Pharma are actively engaged in capital raising efforts to extend the cash runway. The Company also has retained Jefferies LLC as its exclusive financial advisor in evaluating strategic alternatives aimed at maximizing shareholder value. There is no assurance, however, that Citius Pharma will have the resources to assist in 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 unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of the above uncertainty. 3. REVENUE RECOGNITION AND ACCOUNTS RECEIVABLE Revenue Recognition We recognize revenue in accordance with the provisions of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers. In determining the appropriate amount and timing of revenue to be recognized under this guidance, we perform the following five steps: (i) identify the contract(s) with our customer; (ii) identify the promised goods or services in the agreement and determine whether they are performance obligations, including whether they are distinct in the context of the agreement; (iii) measure the transaction price, including the constraint on variable consideration; (iv) allocate the transaction price to the performance obligations based on stand-alone selling prices; and (v) recognize revenue when (or as) we satisfy each performance obligation. Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. We distribute LYMPHIR in the U.S. through third party specialty distributors who are our customers. The third-party specialty distributors subsequently resell our product to health care providers, hospitals and infusion centers. Separately, we have or may enter into payment arrangements with various third-party’s including government healthcare programs who provide coverage and or reimbursement for our product that have been prescribed to a patient. Net Revenues We recognize net revenue from LYMPHIR sales, net of variable consideration and consideration payable to parties other than our customers consisting of estimates related to allowances for sales returns, government chargebacks, patient coupon programs, and specialty distributor fees. Revenue is generally recognized when the customer obtains control of the Company’s product, which occurs at a point in time, upon delivery based on the contractual shipping terms of a contract. We estimate variable consideration using the expected value method, constrained to amounts for which it is probable that a significant reversal of cumulative revenue will not occur when uncertainties are resolved. Calculating certain of these items involves estimates and judgments based on sales or invoice data, contractual terms, historical or expected utilization rates, new information regarding changes in applicable regulations and guidelines that would impact the amount of the actual allowance and our expectations regarding future utilization rates and channel inventory data. We review the adequacy of our provisions for all gross-to-net adjustments on a quarterly basis. Amounts reserved for these adjustments are made when trends or significant events indicate that adjustment is appropriate reflecting actual experience. 7 The Company elected the practical expedient in ASC 606-10-32-18 and does not assess whether a significant financing component exists for contracts in which payment is expected within one year. No other practical expedients were applied. Gross-to-Net Adjustments Specialty Distributor Fees We pay fees for distribution services, such as fees for certain data that customers provide us. We estimate our customers will earn these fees and deduct these fees from gross product revenues at the time we recognize the related revenues. Product Returns Customers have the right to return products if they are damaged, defective, or expired, or as it is defined in their customer agreement. We have estimated product returns considering experience from similar products in the market, historical return patterns, sales data, and inventory levels in the distribution channel. These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of gross product revenue. Chargebacks Chargebacks will occur when federal agencies who we contract with, or may contract with, can purchase off the Federal Supply Schedule or when Public Health Service 340B covered entities purchase directly from our customers at discounted prices. Our customers then charge us the difference between their purchase price and the discounted price. We estimate chargebacks considering the terms of the applicable arrangement and our visibility regarding utilization. We record estimates for these chargebacks at the time of sale as deductions from gross product revenues, with corresponding adjustments to our accounts receivable reserves and allowances. Co-payment Assistance We offer co-payment assistance to patients with commercial insurance that have coverage and are allowed such co-payment assistance. We estimate the average co-payment assistance amounts for our products based on expected customer utilization and record estimates as a reduction from gross product revenue. The Company has deposited the estimated co-pay assistance reflected and included in the gross-to-net adjustments. Three Months Ended Six Months Ended March 31, 2026 March 31, 2026 Gross Product Revenue $ 2,003,760 $ 6,882,480 Gross-to-net adjustments: 336,462 1,271,071 Net Revenue $ 1,667,298 $ 5,611,409 Accounts receivable Accounts receivable is stated at amounts invoiced less allowances for distributor fees, chargebacks, and estimated returns. At March 31, 2026, these sales allowances totaled $ 837,585 . On a periodic basis, the Company evaluates its accounts receivable to establish an allowance for doubtful accounts. The allowance reflects our current estimate of credit losses expected to occur over the life of the receivable. In developing our allowance for expected credit losses, we use assumptions to capture the risk of loss, even if remote, based on a number of factors including existing contractual payment terms, individual customer circumstances, historical payment patterns of our customers, a review of the local economic environment and its potential impact on expected future customer payment patterns. Our collection risk is mitigated to a certain extent by the fact that sales are collected in a reasonable period of time, allowing for the ability to reduce exposure on defaults if collection issues are identified. We update our allowance as necessary to reflect expected credit losses over the remaining accounts receivable that are past due. We do not currently expect our current or future exposures to credit losses to have a significant impact on us. The estimated allowance for expected credit losses was $ 0 as of March 31, 2026. 8 4. INVENTORY Inventory is stated at the lower of actual accumulated costs or net realizable value related to the manufacturing of LYMPHIR commercial products, which became available for sale in December 2025. Cost is determined using the first-in, first-out (FIFO) method. No reserves against inventory were deemed necessary based on an evaluation of the product expiration dating. A summary of inventory is as follows: March 31, 2026 September 30, 2025 Finished goods $ 15,707,625 $ 10,577,876 Work in process 6,951,965 11,708,817 Total $ 22,659,590 $ 22,286,693 Cost of Goods Sold Cost of goods sold consists of direct and indirect costs associated with manufacturing and distributing LYMPHIR. These costs include amounts paid to third-party contract manufacturing organizations for production-related services, including raw materials, drug substance, drug product manufacturing, fill-finish activities, certain testing, and packaging. Cost of goods sold also includes distribution, storage shipping, and handling fees, as well as royalties owed under the Company’s licensing arrangements. 5. PREPAID EXPENSES Prepaid expenses at March 31, 2026 and September 30, 2025 include $ 2,531,280 and $ 1,331,280 , respectively, 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. Prepaid expenses at March 31, 2026 also include $ 221,107 for annual licensing fees paid to the FDA and $ 300,000 for prepaid marketing costs. 6. IN-PROCESS RESEARCH AND DEVELOPMENT, NET In process research and development consists of a beginning carrying value for LYMPHIR of $ 73,400,000 and a net balance of $ 71,106,250 at March 31, 2026. Amortization of in-process research and development commenced upon revenue generation in December 2025. For the three months ended March 31, 2026 and 2025, amortization was $ 1,720,312 and $ 0 , respectively. For the six months ended March 31, 2026 and 2025, amortization was $ 2,293,750 and $ 0 , respectively. In-process research and development for LYMPHIR is being amortized as follows on a straight-line basis over the remaining FDA product exclusivity period which ends in August 2036. A summary of the expected future amortization expense for LYMPHIR in-process research and development is as follows: Year Ending September 30, Amount 2026 (excluding the six months ended March 31,2026) $ 3,440,625 2027 6,881,250 2028 6,881,250 2029 6,881,250 2030 6,881,250 2031 6,881,250 Thereafter 33,259,375 Total $ 71,106,250 9 7. PATENT AND TECHNOLOGY LICENSE AGREEMENTS License Agreement with Eisai In September 2021, Citius Pharma entered into an asset purchase agreement with Dr. Reddy’s Laboratories SA, a subsidiary of Dr. Reddy’s Laboratories, Ltd. (collectively, “Dr. Reddy’s”) and a license agreement with Eisai Co., Ltd. (“Eisai”) to acquire an exclusive license of E7777 (denileukin diftitox), an oncology immunotherapy for the treatment of CTCL, a rare form of non-Hodgkin lymphoma. Citius Pharma renamed E7777 as I/ONTAK and also obtained the trade name LYMPHIR TM for the product. Citius Pharma assigned these agreements to us effective April 1, 2022. The Company received a Biologics License Application (“BLA”) approval from the FDA for LYMPHIR in August 2024. Under the terms of these agreements, Citius Pharma acquired Dr. Reddy’s exclusive license of E7777 from Eisai and other related assets owned by Dr. Reddy’s (which are now owned by Citius Oncology). The exclusive license includes rights to develop and commercialize E7777 in all markets except for Japan and certain parts of Asia. Eisai retains exclusive development and marketing rights for the agent in Japan, China, Korea, Taiwan, Hong Kong, Macau, Indonesia, Thailand, Malaysia, Brunei, Singapore, India, Pakistan, Sri Lanka, Philippines, Vietnam, Myanmar, Cambodia, Laos, Afghanistan, Bangladesh, Bhutan, Nepal, Mongolia, and Papua New Guinea. Citius Pharma paid Dr. Reddy’s a $ 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 (within a range of 10 % to 15 %), and up to $ 300 million for commercial sales milestones. Citius Oncology also must pay on a fiscal quarter basis tiered royalties equal to low double-digit percentages of net product sales (within a range of 10 % to 15 %). The royalties will end on the earlier of (i) the 15-year anniversary of the first commercial sale of the latest indication that received regulatory approval in the applicable country and (ii) the date on which a biosimilar product results in the reduction of net sales in the applicable product by 50 % in two consecutive quarters, as compared to the four quarters prior to the first commercial sale of the biosimilar product. Citius Oncology will also pay to Dr. Reddy’s an amount equal to a low-thirties percentage of any sublicense upfront consideration or milestone payments (or the like) received by us and the greater of (i) a low-thirties percentage of any sublicensee sales-based royalties or (ii) a mid-single digit percentage of such licensee’s net sales. Citius Pharma is a guarantor of Citius Oncology’s payment obligations under these agreements. At the time of the FDA approval for LYMPHIR, a $ 27.5 million milestone payment became payable to Dr. Reddy’s under the terms of the asset purchase agreement for which a balance of $ 17,650,000 remains due as of March 31, 2026. Dr. Reddy’s agreed to a partial deferral without penalty of this milestone payment. Under the license agreement, Eisai was due a $ 5.9 million milestone payment upon FDA approval, 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 Oncology 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 chemistry, manufacturing, and controls (“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 $ 2,535,318 on July 15, 2025, $ 2,350,000 on the 15 th of each of the subsequent four months, and make a final payment of $ 2,197,892 on or before December 15, 2025, in each case with interest on each obligation from its original due date through the date of payment at the rate of 2 % per annum. During the six months ended March 31, 2026, we recorded $ 78,872 in interest expense under the agreement. The parties released each other from any and all claims, losses, damages, costs and expenses that arise from or related to our failure to pay the milestone payment or the other incurred costs under the license agreement except for any claims arising out of a breach of the letter agreement. All other terms of the license agreement remain in full force and effect. On December 15, 2025, we paid Eisai the balance of the outstanding milestone approval fee and accumulated interest on the license fee. On March 30, 2026 we paid Eisai $ 500,000 against the accounts payable balance. At March 31, 2026, we owe Eisai for other unpaid invoices, consisting of $ 2,200,000 of accounts payable and $ 4,062,481 of accrued expenses. 10 The term of the license agreement will continue until the 10-year anniversary of the first commercial sale on a country-by-country basis. The first commercial sale in the United States occurred in December 2025. The term of the license may be extended for additional 10-year periods for all countries in the territory by notifying Eisai and paying an extension fee equal to $ 10 million. Either party may terminate the license agreement upon written notice if the other party is in material breach of the agreement, subject to cure within the designated time periods. Either party also may terminate the license agreement immediately upon written notice if the other party files for bankruptcy or takes related actions or is unable to pay its debts as they become due. Additionally, either party will have the right to terminate the agreement if the other party directly or indirectly challenges the patentability, enforceability or validity of any licensed patent. Under the purchase agreement with Dr. Reddy’s, we are required to (i) use commercially reasonable efforts to make commercially available products in the CTCL indication, peripheral T-cell lymphoma indication and immuno-oncology indication, (ii) initiate two investigator initiated immuno-oncology trials (both of which have been initiated), (iii) use commercially reasonable efforts to achieve each of the approval milestones, and (iv) 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; though approved in August 2024, Dr. Reddy’s waived the six-month requirement and the launch of LYMPHIR in December 2025 satisfied this requirement in the U.S. As part of the definitive agreement with Dr. Reddy’s, Citius Pharma acquired method of use patents in which LYMPHIR is administered in combination with the programmed cell death protein 1 (“PD-1”) pathway inhibitor drug class. PD-1 plays a vital role in inhibiting immune responses and promoting self-tolerance through modulating the activity of T-cells, activating apoptosis of antigen-specific T cells and inhibiting apoptosis of regulatory T cells. The following patents were acquired and subsequently transferred to us: ● US Provisional Application No. 63/070,645, which was filed on August 26, 2020, and subsequently published as US 2022/0062390 A1 on March 3, 2022, entitled Methods of Treating Cancer. ● International Patent Application Number: PCT/IB2021/0576733, which was filed with the World Intellectual Property Organization on August 23, 2021, and subsequently published as WO 2022/043863 A1 on March 3, 2022, entitled, Combination for Use in Methods of Treating Cancer. 8. STOCKHOLDER’S EQUITY Authorized Capital Stock The certificate of incorporation adopted on August 5, 2024, in connection with the Merger, authorized 110,000,000 shares, of which 100,000,000 shares are common stock with a par value of $ 0.0001 , and 10,000,000 shares are preferred stock with a par value of $ 0.0001 . On April 7, 2025, pursuant to Board and stockholder approval, the Company amended its Certificate of Incorporation to increase the authorized shares of common stock from 100,000,000 shares to 400,000,000 shares. Common Stock Offerings July 2025 Offering 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 $ 1.32 per share and accompanying warrant. The immediately exercisable five-year warrants had an initial exercise price of $ 1.32 per share. In connection with the December 10, 2025 offering (discussed below), we agreed to reduce the exercise price of the 6,818,182 warrants to $ 1.09 per share and extended the expiration date to January 20, 2031 . Gross proceeds from the offering were approximately $ 9.0 million and net proceeds were $ 7,546,988 , after deducting placement agent fees and other offering expenses. The estimated fair value of the warrants issued to the investors on July 17, 2025 was approximately $ 8,197,000 . The estimated fair value of the repriced warrants issued to the investors as of December 8, 2025 was approximately $ 5,301,000 . 11 We paid the placement agent a fee of 7.0 % of the gross proceeds and expenses of $ 125,000 and granted the placement agent warrants to purchase 272,727 shares of common stock at an exercise price of $ 1.65 per share. The warrants are exercisable commencing on January 17, 2026 and expire on July 17, 2030 . We also paid an additional 7.0 % cash fee to a prior placement agent and issued warrants to purchase up to 477,273 shares of common stock at an exercise price of $ 1.65 per share. The placement agent warrants are exercisable commencing on August 17, 2025 and expire on July 17, 2030 . The estimated fair value of the placement agent warrants was approximately $ 905,000 . September 2025 Offering 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 $ 1.75 per share and accompanying warrant. The warrants are exercisable beginning on March 10, 2026 and expire on March 10, 2031 and had an initial exercise price of $ 1.84 per share. In connection with the December 10, 2025 offering (discussed below), Citius Oncology agreed to reduce the exercise price of the 5,142,858 warrants to $ 1.09 per share and extended the expiration date to January 20, 2031 . Gross proceeds from the offering were approximately $ 9.0 million and net proceeds were $ 7,619,854 , after deducting placement agent fees and other offering expenses. The estimated fair value of the warrants issued to the investors on September 10, 2025 was approximately $ 6,995,000 . The estimated fair value of the repriced warrants issued to the investors as of December 8, 2025 was approximately $ 4,179,000 . We paid the placement agent a fee of 7.0 % of the gross proceeds and expenses of $ 125,000 . Additionally, we issued the placement agent warrants to purchase 205,714 shares of common stock at an exercise price of $ 1.92 per share. The warrants are exercisable commencing on March 10, 2026 and expire on March 10, 2031 . We also paid an additional 7.0 % cash fee to a prior placement agent and issued warrants to purchase up to 360,000 shares of common stock at an exercise price of $ 2.1875 per share. The placement agent warrants are exercisable commencing on March 10, 2026 and expire on March 10, 2031 . The estimated fair value of the placement agent warrants was approximately $ 717,000 . December 2025 Offering On December 10, 2025, we sold 1,284,404 shares of common stock and accompanying warrants to purchase 1,284,404 shares of common stock, at $ 1.09 per share and accompanying warrant, and additionally sold 15,229,358 pre-funded warrants and accompanying warrants to purchase 15,229,358 shares of common stock at $ 1.0899 per pre-funded warrant and accompanying warrant. Aggregate gross proceeds from the offering were approximately $ 18.0 million and net proceeds were $ 15,062,724 , after deducting placement agent fees and other offering expenses. The 15,229,358 pre-funded warrants are immediately exercisable at $ 0.0001 per share and do not expire. During the three months ended March 31, 2026, 8,183,358 of the pre-funded warrants were exercised for net proceeds of $ 818 . At March 31, 2026, 7,046,000 of the pre-funded warrants remain outstanding. The 16,513,762 warrants have an exercise price of $ 1.09 and are exercisable for five years after stockholder approval, expected in February 2026. The estimated fair value of the 16,513,762 warrants issued to the investors was approximately $ 13,196,000 . We paid the placement agent a fee of 7.0 % of the gross proceeds and expenses of $ 135,000 . Additionally, we issued to the placement agent warrants to purchase 1,155,963 shares of common stock at an exercise price of $ 1.3625 per share. The warrants are exercisable commencing on stockholder approval, which was effective on February 18, 2026, and expire on December 8, 2030 . We also paid an additional 7.0 % cash fee to a prior placement agent and issued warrants to purchase up to 660,550 shares of common stock at an exercise price of $ 1.199 per share. The placement agent warrants are exercisable commencing on stockholder approval and expire on December 8, 2030 . The estimated fair value of the placement agent warrants was approximately $ 1,401,000 . 12 Stock Plans Under the Citius Oncology 2023 Omnibus Stock Incentive Plan, adopted on April 29, 2023, we reserved 15,000,000 common shares for issuance. On August 2, 2024, we reserved 15,000,000 common shares for issuance under the Citius Oncology 2024 Omnibus Stock Incentive Plan (the “2024 Plan”). We amended the 2024 Plan on October 27, 2025 to reserve an additional 15,000,000 shares of common stock for an aggregate of 30,000,000 shares of common stock. The stock plans provide incentives to employees, directors, and consultants through grants of options, SARs, dividend equivalent rights, restricted stock, restricted stock units, or other rights. The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model. Volatility is estimated using the trading activity of Citius Pharma common stock until such time as we have sufficient history. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant commensurate with the expected term assumption. The expected term of stock options granted to employees and directors, all of which qualify as “plain vanilla,” is based on the average of the contractual term (generally 10 years) and the vesting period. For non-employee options, the expected term is the contractual term. A summary of option activity under the stock plans is presented below: Shares Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at September 30, 2025 18,100,000 $ 1.83 8.21 years $ 5,386,000 Granted - - Forfeited - - Outstanding at March 31, 2026 18,100,000 $ 1.83 7.52 years $ - Exercisable at March 31, 2026 11,502,083 $ 1.89 7.30 years $ - Stock-based compensation expense for stock options for the three months ended March 31, 2026 and 2025 was $ 1,858,443 and $ 2,088,572 , respectively. Stock-based compensation expense for stock options for the six months ended March 31, 2026 and 2025 was $ 4,110,478 and $ 3,897,050 , respectively. At March 31, 2026, unrecognized total compensation cost related to unvested awards under our stock plans of $ 3,704,204 is expected to be recognized over a weighted average period of 1.02 years. Restricted Stock Unit Awards On September 19, 2025, the Board of Directors granted restricted stock unit awards of 11,600,000 shares of common stock to employees and directors. The restricted stock unit awards vest on September 19, 2028 . The fair value of the common stock on the date of grant was $ 20,300,000 ($ 1.75 per share). On March 24, 2026, the Board of Directors granted restricted stock unit awards of an aggregate 350,000 shares of common stock to an employee and a consultant. The restricted stock unit awards vest on March 24, 2029. The fair value of the common stock on the date of grant was $ 203,000 ($ 0.58 per share). Stock-based compensation expense for restricted stock unit awards for the three months ended March 31, 2026 was $ 1,668,267 . Stock-based compensation expense for restricted stock unit awards for the six months ended March 31, 2026 was $ 3,372,282 . At March 31, 2026, unrecognized total compensation cost related to unvested restricted stock unit awards under the stock plans of $ 16,926,977 is expected to be recognized over a weighted average period of 2.48 years. 13 Warrants We have reserved 38,653,029 shares of common stock for the exercise of outstanding warrants. The following table summarizes the warrants outstanding at March 31, 2026: Exercise Price Number Expiration Dates July 2025 Offering Investors $ 1.09 6,818,182 January 20, 2031 July 2025 Offering Agent $ 1.65 272,727 July 17, 2030 July 2025 Prior Offering Agent $ 1.65 477,273 July 17, 2030 September 2025 Offering Investors $ 1.09 5,142,858 January 20,2031 September 2025 Offering Agent $ 1.92 205,714 March 10, 2031 September 2025 Prior Offering Agent $ 2.1875 360,000 March 10, 2031 December 2025 Offering Investors $ 0.0001 7,046,000 None December 2025 Offering Investors $ 1.09 16,513,762 January 20, 2031 December 2025 Placement Offering Agent $ 1.3625 1,155,963 December 8, 2030 December 2025 Prior Offering Agent $ 1.199 660,550 December 8, 2030 38,653,029 At March 31, 2026, the weighted average remaining life of the outstanding warrants was estimated at 3.97 years and all warrants are exercisable. At March 31, 2026 the aggregate intrinsic value of the warrants outstanding was $ 4,367,815 . Common Stock Reserved A summary of common stock reserved for future issuances by the Company as of March 31, 2026 is as follows: Stock plan options outstanding 18,100,000 Restricted stock awards 11,950,000 Stock plan shares available for future grants 14,950,000 Warrants outstanding 38,653,029 Total 83,653,029 9. COMMERCIAL MANUFACTURING CONTRACTS The Company had previously entered into an agreement with a contract manufacturing organization, (“CMO”) for the manufacture and supply of bulk drug substance, (“BDS”) with the agreement continuing through calendar year 2026. The agreement was terminated effective February 2026 by the CMO due to the breach of payment obligations by the Company. Termination fees associated with this are approximately $ 20.1 million consisting of $ 17.1 million of charges associated with manufacturing which was previously committed in 2025 and 2026 but not produced, as well as $ 1.2 million of un-invoiced but incurred charges related to previous manufactured batches and $ 1.8 million of interest and other charges. These fees are included in General and Administrative Expense for the quarter ended March 31, 2026. Separately, in March 2026 the CMO gave notice that it made a decision to terminate all production at the current site related to microbial manufacturing and decommission the associated manufacturing lines. In March 2026 and in connection with the notice of termination from the CMO, we recorded a contract cancellation fee of $ 19,733,307 net of invoices already included in accounts payable. The Company has been evaluating new BDS suppliers and anticipates entering into a letter of intent with a new CMO by June 30, 2026 with a subsequent master services agreement to follow. At this time, based on stock on hand and availability of alternate suppliers, we anticipate no interruption in commercial supply for the foreseeable future. As of March 31, 2026, 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 $ 4.0 million consisting of purchase commitment obligations of $ 2.2 million in calendar year 2026 and $ 1.8 million in calendar year 2027. 14 10. RELATED PARTY TRANSACTIONS Our officers and directors also serve as officers of Citius Pharma. As of March 31, 2026, the Company does not have any employees. The Company and Citius Pharma entered into the A&R Shared Services Agreement and under the terms of the agreement, Citius Pharma provides management and scientific services to us. During the three months ended March 31, 2026, Citius Pharma charged us $ 567,937 for reimbursement of general and administrative payroll, $ 469,000 for reimbursement of research and development payroll, and $ 27,939 for the use of shared office space. During the three months ended March 31, 2025, Citius Pharma charged us $ 567,937 for reimbursement of general and administrative payroll, $ 480,000 for reimbursement of research and development payroll, and $ 30,368 for the use of shared office space. During the six months ended March 31, 2026, Citius Pharma charged us $ 1,065,874 for reimbursement of general and administrative payroll, $ 949,000 for reimbursement of research and development payroll, and $ 55,878 for the use of shared office space. During the six months ended March 31, 2025, Citius Pharma charged us $ 1,135,874 for reimbursement of general and administrative payroll, $ 960,000 for reimbursement of research and development payroll, and $ 58,307 for the use of shared office space. We have had limited cash, therefore most of our expenditures were paid by Citius Pharma and reflected in the due to related party account. Citius Pharma advanced cash to us for a non-interest bearing, unsecured promissory note, dated August 16, 2024, in the principal amount of $ 3,800,111 . The note is repayable in full upon a financing of at least $ 50 million by us. Management does not anticipate such repayment within the next twelve months and has classified the note payable as a long-term liability (See Note 12). 11. GAIN ON SALE OF NEW JERSEY NET OPERATING LOSSES We recognized a gain of $ 1,762,000 for the six months ended March 31, 2026, in connection with the sale of certain New Jersey income tax net operating losses to a third party under the New Jersey Technology Business Tax Certificate Transfer Program. 12. SUBSEQUENT EVENTS On April 22, 2026, we received a notification letter from the Nasdaq Stock Market LLC (“Nasdaq”) indicating that we were not in compliance with Nasdaq Listing Rule 5550(a)(2) because the minimum bid price of our common stock on the Nasdaq Capital Market closed below $ 1.00 per share for 30 consecutive business days. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company has a compliance period of 180 calendar days, or until October 19, 2026, to regain compliance with the Bid Price Rule. Warrant Inducement Transaction On May 5, 2026, we entered into an agreement with the holder of certain existing warrants to purchase up to 12,777,778 shares of common stock, which consists of all of the 6,818,182 shares underlying warrants originally issued on July 16, 2025, all of the 5,142,858 shares underlying warrants originally issued on September 10, 2025, and 816,738 shares underlying warrants originally issued December 10, 2025, each with an exercise price of $ 1.09 per share. As an inducement to the holder for exercising the warrants in cash at a reduced exercise price of $ 0.90 per share, we issued to the holder new warrants to purchase up to an aggregate of 25,555,556 shares of common stock, which have similar terms to the warrants exercised, other than an exercise price of $ 0.90 . Gross proceeds were approximately $ 11.5 million, before deducting placement agent fees and expenses. 15 Loan Agreement On May 5, 2026 the Company, entered into a Loan Agreement that makes available term loans in an aggregate principal amount of up to $ 25.0 million (collectively, the “Loans”), with (i) $ 10.0 million to be funded on May 6, 2026 (“Tranche 1”), (ii) up to $ 7.0 million beginning on the later of (A) the date on which certain net revenue and liquidity milestones are achieved and (B) October 1, 2026, and continuing through December 31, 2026 (“Tranche 2”), and (iii) up to $ 8.0 million beginning on the later of (A) the date on which certain additional net revenue milestones are achieved and one or more Tranche 2 Loans have been drawn and (B) January 1, 2027, and continuing through March 31, 2027 (“Tranche 3”). The Loans bear interest at an annual rate equal to the greater of (x) prime plus 6.00 % or 12.75 %. The Loans are secured by a lien upon and security interest in all of the Company’s and its subsidiary’s assets, including intellectual property, subject to agreed exceptions. The maturity date of the Loans is November 1, 2029 (the “Maturity Date”). Pursuant to the Loan Agreement, the Lender will have the right, at any time while any Loan is outstanding, to convert up to its pro rata share of $ 4.0 million of the outstanding principal of the Loans (the “Conversion Option”) into shares of the Company’s common stock at a price per share equal to 120% of the exercise price of the Lender Warrants (as defined below) (the “Conversion Price”), subject to certain terms and conditions, including beneficial ownership limitations. In addition, the Company has agreed to use its reasonable best efforts to grant to each Lender the right to invest up to its pro rata share of $ 1.0 million in any issuance of equity securities of the Company after the Closing Date, on the same terms, conditions and pricing offered by the Company to other investors participating in such financing transaction (such right, the “Participation Right”). The Participation Right terminates 30 days after the repayment in full of all of the obligations under the Loan Agreement (other than inchoate indemnity obligations or other obligations that specifically survive termination). Note Payable to Related Party On May 4, 2026, the Company and Citius Pharma, entered into a Third Amendment to Promissory Note (the “Third Amendment”), which amends the promissory note, dated August 16, 2024, as previously amended on September 10, 2025 and December 10, 2025, issued by the Company to Citius Pharma in the original principal amount of $ 3,800,111 (the “Promissory Note”), to, among other things, (i) conform the payment and maturity provisions of the Promissory Note to the May 6, 2026 subordination agreement, such that the entire unpaid principal balance of the Promissory Note shall be payable on a date that is 91 days after the debt under the May 6, 2026 financing has been fully paid and the Loan Agreement has been terminated, (ii) eliminate all prior maturity triggers related to capital raises, issuances of debt or equity securities, or royalty-backed monetizations, (iii) prohibit prepayment of the Promissory Note in cash prior to the new maturity date, and (iv) add a voluntary conversion feature allowing Citius Pharma, subject to the Company’s approval, to convert all or a portion of the outstanding principal into shares of common stock at a conversion price equal to $ 0.90 per share. All other terms of the Promissory Note remain the same. 16 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of our financial condition and results of operations for the three and six months ended March 31, 2026 and 2025 should be read together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Report and in conjunction with the audited financial statements of Citius Oncology, Inc. included in our Annual Report on Form 10-K for the year ended September 30, 2025, filed with the SEC on December 23, 2025. 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” on page iii of this Report. Business Citius Oncology is a specialty biopharmaceutical company focused on developing and commercializing innovative targeted oncology therapies. We have developed E7777 (denileukin diftitox), an approved oncology immunotherapy for the treatment of cutaneous T-cell lymphoma (“CTCL”), a rare form of non-Hodgkin lymphoma. We have obtained the trade name of LYMPHIR for E7777 and revenue commenced in December 2025 upon the commercial launch of LYMPHIR. We were incorporated in the Cayman Islands on March 1, 2021, for the purpose of effecting a business combination with one or more businesses. In August 2024, we reincorporated in Delaware and completed the Merger whereby we acquired SpinCo as a wholly owned subsidiary and changed our name to Citius Oncology, Inc. SpinCo began operations in April 2022. Since inception, we have devoted substantially all of our efforts to business planning, research and development, recruiting management and technical staff and commercially launching LYMPHIR. 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 In September 2021, Citius Pharma entered into an asset purchase agreement with Dr. 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 renamed E7777 as I/ONTAK and also obtained the trade name LYMPHIR TM for the product. Citius Pharma assigned these agreements to us effective April 1, 2022. Denileukin diftitox is referred to in this 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 of E7777 from Eisai and other related assets owned by Dr. Reddy’s which are now owned by us. The exclusive license includes rights to develop and commercialize E7777 in all markets except for Japan and certain parts of Asia. Eisai retains exclusive development and marketing rights for the agent in Japan, China, Korea, Taiwan, Hong Kong, Macau, Indonesia, Thailand, Malaysia, Brunei, Singapore, India, Pakistan, Sri Lanka, Philippines, Vietnam, Myanmar, Cambodia, Laos, Afghanistan, Bangladesh, Bhutan, Nepal, Mongolia, and Papua New Guinea. Citius Pharma paid Dr. Reddy’s a $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 (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 net sales. Citius Pharma is a guarantor of our payment obligations under these agreements. 17 At the time of the FDA approval for LYMPHIR, a $27.5 million milestone payment became payable to Dr. Reddy’s under the terms of the asset purchase agreement for which a balance of $17.65 million remains due as of March 31, 2026. Dr. Reddy’s agreed to a partial deferral without penalty of this milestone payment. Under the license agreement, Eisai was due a $5.9 million milestone payment upon FDA approval, 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 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. 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 $2,535,318 on July 15, 2025, $2,350,000 on the 15 th of each of the subsequent four months, and make a final payment of $2,197,892 on or before December 15, 2025, in each case with interest on each obligation from its original due date through the date of payment at the rate of 2% per annum. During the six months ended March 31, 2026, we recorded $78,872 in interest expense under the agreement. The parties released each other from any and all claims, losses, damages, costs and expenses that arise from or related to our failure to pay the milestone payment or the other incurred costs under the license agreement except for any claims arising out of a breach of the letter agreement. All other terms of the license agreement remain in full force and effect. On December 15, 2025, we paid Eisai the balance of the outstanding milestone approval fee and accumulated interest on the license fee. At March 31, 2026, we owe Eisai approximately $6.3 million for certain other unpaid invoices. The term of the license agreement will continue until the 10-year anniversary of the first commercial sale on a country-by-country basis. The first commercial sale in the United States occurred in December 2025. The term of the license may be extended for additional 10-year periods for all countries in the territory by notifying Eisai and paying an extension fee equal to $10 million. Either party may terminate the license agreement upon written notice if the other party is in material breach of the agreement, subject to cure within the designated time periods. Either party also may terminate the license agreement immediately upon written notice if the other party files for bankruptcy or takes related actions or is unable to pay its debts as they become due. Additionally, either party will have the right to terminate the agreement if the other party directly or indirectly challenges the patentability, enforceability or validity of any licensed patent. Under the purchase agreement with Dr. Reddy’s, we are required to (i) use commercially reasonable efforts to make commercially available products in the CTCL indication, peripheral T-cell lymphoma indication and immuno-oncology indication, (ii) initiate two investigator initiated immuno-oncology trials (both of which have been initiated), (iii) use commercially reasonable efforts to achieve each of the approval milestones, and (iv) 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; though approved in August 2024, Dr. Reddy’s waived the six-month requirement and the launch of LYMPHIR in December 2025 satisfied this requirement in the U.S. Recent Events Commercial Launch Activities On March 31, 2026, we provided an update on the U.S. commercial launch of LYMPHIR, highlighting continued adoption across leading oncology centers, broad payer coverage progress, and advancing investigator-led clinical studies. We expect continued expansion in prescribing activity, together with further clinical validation through ongoing investigator-led studies. These trends support LYMPHIR’s potential not only for continued integration in the CTCL treatment landscape, but also its potential as a part of a combination immunotherapy regimen in other cancers. 18 Key Early Launch Metrics : ● Growth in orders from target institutions since launch, with initial accounts placing repeat orders; ● Strong institutional uptake, with 83% of target accounts having added or actively progressing LYMPHIR through formulary review; ● Broad and expanding market access with 135 health plans representing 80% of covered lives, secured and reimbursement systems established; ● No reported reimbursement denials or prior authorization barriers; ● Increasing demand for product education; ● Initial penetration into community infusion centers underway with patients beginning to transition from larger cancer centers; ● Commercial buildout proceeding, with field team onboarding and expansion in progress with our contracted sales organization; and, ● Commercial supply remains well positioned to support anticipated U.S. demand, and international expansion. On April 29, 2026, we announced the initial shipment of LYMPHIR to Europe through a regional distribution partner, marking an important milestone in expanding access to the therapy for patients outside the US. LYMPHIR will be made available to eligible patients through Named Patient Programs in accordance with local regulations in each country. The initiation of European distribution represents a strategic step in our effort to extend access to LYMPHIR. US Distribution Agreements In 2025, the Company executed three service agreements with U.S. pharmaceutical specialty distributors who are our customers and who distribute LYMPHIR to healthcare organizations which include academic centers, community oncology practices, as well as infusion centers. The transaction price for gross product revenues under these customer specialty distributor agreements are based on the contractually stated wholesale acquisition cost (“WAC”). The transaction price is reduced for variable considerations, including product returns, chargebacks, co-payment assistance, and other gross-to-net adjustments, which are reasonably estimated by the Company and constrained to amounts that are probable not to result in a significant revenue reversal. As LYMPHIR is a newly launched product, any reasonable estimates made by the Company regarding certain gross-to-net adjustments will result from certain information, such as inventory held by distributors, market data or comparable products, until sufficient historical data becomes available. 19 International Distribution Agreements On October 7, 2025, we entered into an exclusive distribution agreement with Integris Pharma S.A., headquartered in Athens, Greece to make LYMPHIR available to eligible patients through country-specific Named Patient Programs (NPPs). The partnership covers Greece, Cyprus, Malta, Bulgaria, Romania, Croatia, Serbia, Albania, Bosnia Herzegovina, Kosovo, Montenegro and North Macedonia. NPPs are formally recognized pathways designed to give patients earlier access to promising new medicines in advance of full marketing authorization and commercial availability in markets outside the US. Under these programs, a treating physician may request a therapy for an individual patient when no adequate approved alternatives exist. In doing so, NPPs bridge a critical gap between the completion of clinical trials in each region and broad market introduction, ensuring that patients with serious illnesses are not left waiting for life-extending innovations. These programs provide access, where permitted by local law, and do not constitute commercial approval of LYMPHIR outside the U.S. On December 4, 2025, we announced an exclusive distribution agreement with Er-Kim İlaç Sanayi ve Ticaret A.Ş. (“Er-Kim”), a leading pharmaceutical distributor based in Turkey, for LYMPHIR. Under the agreement, Er-Kim will be the exclusive distributor of LYMPHIR in Turkey and key Gulf Cooperation Council (GCC) countries, including Bahrain, Qatar, Oman, Kuwait, Saudi Arabia, and the United Arab Emirates. On February 11, 2026, we announced an exclusive distribution agreement with Uniphar (“Uniphar”), a leading international healthcare services company, to support access to LYMPHIR. Under the agreement, Uniphar will serve as our exclusive distribution partner in designated international territories in Western and Eastern Europe. We will supply finished product and provide ongoing support in accordance with the agreement. LYMPHIR is not approved for commercial use outside the U.S. and will be provided solely through country-specific managed access programs, which do not constitute marketing authorization or a commercial launch. Investigator Initiated Trials On March 4, 2026, we announced positive topline safety and efficacy results from an investigator-initiated Phase 1 trial evaluating LYMPHIR administered prior to commercial CD19 directed CAR T therapy in patients with high risk relapsed or refractory diffuse large B cell lymphoma (DLBCL). On March 10, 2026, we announced positive topline results from a completed investigator-initiated Phase 1 clinical trial conducted by University of Pittsburgh investigators. This study evaluated the direct T-regulatory (Treg) cell depletion activity of LYMPHIR in combination with the PD-1 immune checkpoint inhibitor pembrolizumab (KEYTRUDA ® ) in patients with recurrent or refractory gynecologic cancers, including ovarian and endometrial malignancies. Discussions are ongoing regarding next-stage development with respect to both investigator-initiated trials. 20 RESULTS OF OPERATIONS Three months ended March 31, 2026 compared with the Three months ended March 31, 2025 Three Months Ended March 31, 2026 Three Months Ended March 31, 2025 Revenue $ 1,667,298 $ — Cost of revenues (328,878 ) — Gross profit 1,338,420 — Operating expenses: Research and development 1,079,354 3,139,413 Amortization of in-process research and development 1,720,312 — General and administrative 23,625,639 2,243,327 Stock-based compensation – general and administrative 3,526,710 2,088,572 Total operating expenses 29,952,015 7,471,312 Operating loss (28,613,595 ) (7,471,312 ) Interest income 43,721 — Gain on sale of New Jersey net operating losses 1,762,000 Interest expense (33,031 ) — Loss before income taxes (26,840,905 ) (7,471,312 ) Income tax expense (benefit) (231,210 ) 264,240 Net loss $ (26,609,695 ) $ (7,735,552 ) Revenues Product revenues for the three months ended March 31, 2026 were $1,667,298, as we began commercial distribution of LYMPHIR in December 2025. Gross profit on product revenues for the three months ended March 31, 2026 was approximately 80%. We believe that revenues will increase in the future as LYMPHIR gains market acceptance and have already seen initial accounts placing repeat orders, and on April 29, 2026, we announced our initial shipment to Europe. Research and Development Expenses For the three months ended March 31, 2026, research and development expenses were $1,079,354, as compared to $3,139,413 for the three months ended March 31, 2025. The decrease of $2,060,059 was primarily related to expense recognized in the three months ended March 31, 2025 for a pre-license inspection batch Lymphir previously manufactured. Amortization of in-process research and development Amortization of in-process research and development commenced upon revenue generation in December 2025. For the three months ended March 31, 2026, amortization was $1,720,312. In-process research and development is being amortized on a straight-line basis over the remaining FDA product exclusivity period, which ends in August 2036. General and Administrative Expenses For the three months ended March 31, 2026, general and administrative expenses were $23,625,639, as compared to $2,243,327 for the three months ended March 31, 2025. The increase of $21,382,312 was primarily related to a notice of termination from a contract manufacturing organization received in February 2026. In March 2026, we recorded a contract cancellation fee of $19,733,307. 21 Stock-based Compensation Expense For the three months ended March 31, 2026, stock-based compensation expense was $3,526,710, as compared to $2,088,572 for the three months ended March 31, 2025. The increase of $1,438,138 in stock-based compensation expense was primarily related to the restricted stock unit awards granted in September 2025. Interest Income For the three months ended March 31, 2026, interest income was $43,721, as compared to $0 for the three months ended March 31, 2025. We have invested some of the proceeds of our recent equity offerings in a money market account. Gain on sale of New Jersey net operating losses We recognized a gain of $1,762,000 for the three months ended March 31, 2026, in connection with the sale of certain New Jersey income tax net operating losses to a third party under the New Jersey Technology Business Tax Certificate Transfer Program. Interest Expense For the three months ended March 31, 2026, interest expense was $33,031, as compared to $0 for the three months ended March 31, 2025. Interest expense was related to the March 28, 2025 letter agreement with Eisai. Income Taxes The Company recorded a deferred income tax benefit of $231,210 in the three months ended March 31, 2026 and a deferred income tax expense of 264,240 in the three months ended March 31, 2025. Deferred income tax expense or benefit is related to the difference in amortization for taxable purposes of our in-process research and development asset and the financial statement amortization. Net Loss For the three months ended March 31, 2026, we incurred a net loss of $26,609,695, as compared to a net loss of $7,735,552 for the three months ended March 31, 2025. The increase of $18,874,143 in net loss was due to the increase of $22,480,703 in operating expenses offset by the increase in gross profit of $1,338,420, the increase in other income of $1,772,690 and the decrease in income tax expense of $495,450. Six months ended March 31, 2026 compared with the Six months ended March 31, 2025 Six Months Ended March 31, 2026 Six Months Ended March 31, 2025 Revenue $ 5,611,409 $ — Cost of revenues (1,118,086 ) — Gross profit 4,493,323 — Operating expenses: Research and development 2,097,706 4,403,921 Amortization of in-process research and development 2,293,750 — General and administrative 26,484,978 5,565,306 Stock-based compensation – general and administrative 7,482,760 3,897,050 Total operating expenses 38,359,194 13,866,277 Operating loss (33,865,871 ) (13,866,277 ) Interest income 72,009 — Gain on sale of New Jersey net operating losses 1,762,000 — Interest expense (78,872 ) — Loss before income taxes (32,110,734 ) (13,866,277 ) Income tax expense 33,030 528,480 Net loss $ (32,143,764 ) $ (14,394,757 ) 22 Revenues Product revenues for the six months ended March 31, 2026 were $5,611,409, as we began commercial distribution of LYMPHIR in December 2025. Gross profit on product revenues for the six months ended March 31, 2026 was approximately 80%. We believe that revenues will increase in the future as LYMPHIR gains market acceptance and have already seen initial accounts placing repeat orders, and on April 29, 2026, we announced our initial shipment to Europe. Research and Development Expenses For the six months ended March 31, 2026, research and development expenses were $2,097,706, as compared to $4,403,921 for the six months ended March 31, 2025. The decrease of $2,306,215 was primarily related to was primarily related to expense recognized in the three months ended March 31, 2025 for a pre-license inspection batch of LYMPHIR previously manufactured. Amortization of in-process research and development Amortization of in-process research and development commenced upon revenue generation in December 2025. For the six months ended March 31, 2026, amortization was $2,293,750. In-process research and development is being amortized on a straight-line basis over the remaining FDA product exclusivity period, which ends in August 2036. General and Administrative Expenses For the six months ended March 31, 2026, general and administrative expenses were $26,484,978, as compared to $5,565,306 for the six months ended March 31, 2025. The increase of $20,919,672 was primarily related to a notice of termination from a contract manufacturing organization received in February 2026. In March 2026, we recorded a contract cancellation fee of $19,733,307. Stock-based Compensation Expense For the six months ended March 31, 2026, stock-based compensation expense was $7,482,760, as compared to $3,897,050 for the six months ended March 31, 2025. The increase of $3,585,710 in stock-based compensation expense was primarily related to the restricted stock unit awards granted in September 2025. Interest Income For the six months ended March 31, 2026, interest income was $72,009, as compared to $0 for the six months ended March 31, 2025. We have invested some of the proceeds of our recent equity offerings in a money market account. Gain on sale of New Jersey net operating losses We recognized a gain of $1,762,000 for the six months ended March 31, 2026, in connection with the sale of certain New Jersey income tax net operating losses to a third party under the New Jersey Technology Business Tax Certificate Transfer Program. 23 Interest Expense For the six months ended March 31, 2026, interest expense was $78,872, as compared to $0 for the six months ended March 31, 2025. Interest expense was related to the March 28, 2025 letter agreement with Eisai. Income Taxes The Company recorded a deferred income tax expense of $33,030 for the six months ended March 31, 2026 and a deferred income tax expense of $528,480 for the six months ended March 31, 2025. Deferred income tax expense or benefit is related to the difference in amortization for taxable purposes of our in-process research and development asset and the financial statement amortization. Net Loss For the six months ended March 31, 2026, we incurred a net loss of $32,143,764, as compared to a net loss of $14,394,757 for the six months ended March 31, 2025. The increase of $17,749,007 in net loss was due to the increase of $24,492,917 in operating expenses offset by the increase in gross profit of $4,493,323, the increase in other income of $1,755,137 and the decrease in income tax expense of $495,450. LIQUIDITY AND CAPITAL RESOURCES Liquidity and Working Capital Citius Oncology has incurred operating losses since inception and incurred a net loss of $32,143,764 for the six months ended March 31, 2026. At March 31, 2026, we had an accumulated deficit of $131.4 million. The Company has had limited revenue commencing in December 2025 and has historically relied on funding from Citius Pharma to finance our operations. At March 31, 2026, we had accrued expenses related to LYMPHIR of $XXXXX and other accrued expenses of $YYY. At March 31, 2026, we had $2,632,634 in cash and a negative working capital of approximately $29.4 million. On May 5, 2026, Citius Oncology received gross proceeds of approximately $11.5 million from the exercise of certain warrants. In addition, the Company entered into a loan agreement for up to $25.0 million, with $10.0 million funded on May 6, 2026, up to $7.0 million available on the later of (A) the date on which certain net revenue and liquidity milestones are achieved and (B) October 1, 2026, and continuing through December 31, 2026, and up to $8.0 million available beginning on the later of (A) the date on which certain additional net revenue milestones are achieved and (B) January 1, 2027, and continuing through March 31, 2027. The loans bear interest at the greater of the prime rate plus 6% or 12.75%. The loans are secured by an interest in all of the Company’s assets, including intellectual property, subject to agreed exceptions. The maturity date of the loans is November 1, 2029. 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, in addition to generating income from the sale of LYMPHIR, we need to obtain substantial additional financing and cannot be sure that any additional funding will be available on terms favorable to us, or at all. As of March 31, 2026, our outstanding milestone payments and purchase commitments include: ● On March 28, 2025, we entered into a letter agreement to pay Eisai $2,535,318 on or before July 15, 2025, and $2,350,000 thereafter on the 15 th of each of the next four months, and make a final payment of $2,197,892 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 March 31, 2026, we have paid the milestone in full and owe a balance of approximately $6.3 million to Eisai for certain other invoices. 24 ● 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 $17.65 million remains due as of March 31, 2026. Dr. Reddy’s has agreed to a partial deferral without penalty of this milestone payment. ● The Company had previously entered into an agreement with a contract manufacturing organization, (“CMO”) for the manufacture and supply of bulk drug substance, (“BDS”) with the agreement continuing through calendar year 2026. The agreement was terminated effective February 2026 by the CMO due to the breach of payment obligations by the Company. Termination fees associated with this are approximately $20.1 million consisting of $17.1 million of charges associated with manufacturing which was previously committed in 2025 and 2026 but not produced, as well as $1.2 million of un-invoiced but incurred charges related to previous manufactured batches and $1.8 million of interest and other charges. These fees are included in General and Administrative Expense for the quarter ended March 31, 2026. Separately, in March 2026 the CMO gave notice that it made a decision to terminate all production at the current site related to microbial manufacturing and decommission the associated manufacturing lines. In March 2026 and in connection with the notice of termination from the CMO, we recorded a contract cancellation fee of $19,733,307 net of invoices already included in accounts payable. The Company has been evaluating new BDS suppliers and anticipates entering into a letter of intent with a new CMO by June 30, 2026 with a subsequent master services agreement to follow. At this time, we anticipate no interruption in commercial supply for the foreseeable future. ● As of March 31, 2026, 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 $4.0 million consisting of purchase commitment obligations of $2.2 million in calendar years 2026 and $1.8 million in 2027. We plan to continue to partially rely on funding from Citius Pharma, to raise capital through equity and debt financings, and to generate revenue from sales of LYMPHIR. We also have retained Jefferies LLC as our exclusive financial advisor in evaluating strategic alternatives aimed at maximizing shareholder value. There is no assurance, however, that Citius Pharma will have the resources to continue partially 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 our May 2026 equity and debt financings, we expect that we and Citius Pharma collectively will have sufficient funds to continue our operations through November 2026. We will need to raise additional capital in the future to support our operations beyond November 2026. There is no assurance, however, that we will be successful in raising needed capital or that the proceeds will be received in an amount or in a timely manner to support our operations. Investing Activities During the six months ended March 31, 2026, we paid the final $2,900,000 due to Eisai in connection with the LYMPHIR approval milestone and paid $2,100,000 in connection with the milestone payment due to Dr. Reddy’s. At March 31, 2026, we owe Dr. Reddy’s $17,650,000 representing the balance of the approval milestone. Inflation Our management believes that inflation has not had a material effect on our results of operations. Off Balance Sheet Arrangements We do not have any off-balance sheet arrangements. 25 Critical Accounting Policies and Estimates The preparation of our financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities as of the date of the financial statements and the amounts of revenues and expenses recorded during the reporting periods. We base our estimates on historical experience, where applicable, and other assumptions that we believe are reasonable under the circumstances. Actual results may differ from our estimates under different assumptions or conditions. Our critical accounting policies and use of estimates as discussed in the footnotes to the condensed consolidated financial statements included within this Form 10-Q should also be read in conjunction with, the annual consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2025, filed with the SEC on December 23, 2025. Item 3. Quantitative and Qualitative Disclosures About Market Risk. Not applicable. Item 4. Controls and Procedures. Evaluation of 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 March 31, 2026. 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 March 31, 2026, 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. Changes In Internal Control Over Financial Reporting There were no changes in our internal control over financial reporting during the quarter ended March 31, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 26 PART II - OTHER INFORMATION Item 1. Legal Proceedings. None. Item 1A. Risk Factors. There have been no material changes to the Company’s risk factors as disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2025, filed with the SEC on December 23, 2025. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. During the quarter ended March 31, 2026, we did not issue or sell any unregistered securities not previously disclosed. Item 3. Defaults Upon Senior Securities. None. Item 4. Mine Safety Disclosures. Not applicable. Item 5. Other Information. During the quarter ended March 31, 2026, none of our directors or officers adopted or terminated any contract or written plan for the purchase or sale of our securities. 27 Item 6. Exhibits. 4.1 Form of Warrant issued on May 6, 2026 (incorporated by reference to Exhibit 4.1 to the Form 8-K filed on May 6, 2026). 4.2 Form of Placement Agent Warrant issued on May 6, 2026 (incorporated by reference to Exhibit 4.2 to the Form 8-K filed on May 6, 2026). 4.3 Form of Lender Warrant issued on May 6, 2026 (incorporated by reference to Exhibit 4.3 to the Form 8-K filed on May 6, 2026). 10.1 Form of Warrant Inducement Agreement, dated as of May 5, 2026, by and between Citius Oncology, Inc. and the holder signatory thereto (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on May 6, 2026). 10.2 Form of Warrant Amendment Agreement, dated as of May 5, 2026, by and between Citius Oncology, Inc. and the holder signatory thereto (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on May 6, 2026). 10.3 Third Amendment to Promissory Note, dated May 4, 2026, by and between Citius Oncology, Inc. and Citius Pharmaceuticals, Inc. (incorporated by reference to Exhibit 10.3 to the Form 8-K filed on May 6, 2026). 10.4 Loan and Security Agreement, dated as of May 5, 2026, among the Company, Citius Sub, the Agent and the Lenders (incorporated by reference to Exhibit 10.4 to the Form 8-K filed on May 6, 2026). 10.5 Supplement to Loan and Security Agreement, dated as of May 5, 2026, among the Company, Citius Sub, the Agent and the Lenders (incorporated by reference to Exhibit 10.5 to the Form 8-K filed on May 6, 2026). 10.6 Subordination Agreement, dated as of May 5, 2026, among the Parent, the Agent and the Company (incorporated by reference to Exhibit 10.6 to the Form 8-K filed on May 6, 2026).+ 31.1 Certification of the Principal Executive Officer pursuant to Exchange Act Rule 13a-14(a).* 31.2 Certification of the Principal Financial Officer pursuant to Exchange Act Rule 13a-14(a).* 32.1 Certification of the Principal Executive and Principal Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.* EX-101.INS Inline XBRL Instance Document* EX-101.SCH Inline XBRL Taxonomy Extension Schema Document* EX-101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document* EX-101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document* EX-101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document* EX-101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document* EX-104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)* * Filed herewith. + Certain portions of this exhibit that are not material and would be competitively harmful if publicly disclosed have been redacted pursuant to Item 601(b)(10)(iv) of Regulation S-K. Copies of the unredacted exhibit will be furnished to the SEC upon request. 28 SIGNATURES Pursuant to the requirements 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: May 15, 2026 By: /s/ Leonard Mazur Leonard Mazur Chief Executive Officer (Principal Executive Officer) Date: May 15, 2026 By: /s/ Jaime Bartushak Jaime Bartushak Chief Financial Officer (Principal Financial and Accounting Officer) 29