What changed in this filing

/stocks — the workspaceLOADING

Item 5. Market for Registrant’s Common Equity

2021-12-15 compared with 2020-12-16 · 13 added, 346 removed, 7 unchanged (98% of the section changed)

Market for Registrant’s Common Equity, Related

Stockholder Matters and Issuer Purchases of Equity Securities

The information regarding our equity compensation plans required

by this Item is found in Item 12 of this report.

Market for Registrant’s Common

Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The information regarding our equity compensation

plans required by this Item is found in Item 12 of this report.

Market Information

Our common stock and certain warrants to purchase common stock

trade on The Nasdaq Capital Market under the symbol “CTXR”

and “CTXRW,”

respectively.

Our common stock and certain warrants to purchase

common stock trade on The Nasdaq Capital Market under the symbol “CTXR” and “CTXRW,” respectively.

Holders of Common Stock

2 unchanged sentences

We have never paid dividends on our common stock.

to follow a policy of retaining earnings, if any, to finance the growth of our business and do not anticipate paying any cash dividends

in the foreseeable future.

The declaration and payment of future dividends on the common stock will be at sole discretion of our

Board of Directors and will depend on our profitability and financial condition, capital requirements, statutory and contractual

restrictions, future prospects and other factors deemed relevant by the Board.

We intend to follow a policy of retaining earnings, if any, to finance the growth of our business and do not anticipate paying any cash

dividends in the foreseeable future.

The declaration and payment of future dividends on the common stock will be at sole discretion of

our Board of Directors and will depend on our profitability and financial condition, capital requirements, statutory and contractual restrictions,

future prospects and other factors deemed relevant by the Board.

Recent Sales of Unregistered Securities

Issuer Purchases of Equity Securities

We did not make any purchases of our common stock during the

three months ended September 30, 2020, which is the fourth quarter of our fiscal year.

Selected Financial Data

Not required.

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 should be read together with our financial statements and related notes included elsewhere in this annual

report on Form 10-K.

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

plans, objectives, expectations and intentions.

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

When used, the words “believe,”

“plan,”

“intend,”

“anticipate,”

“target,”

“estimate,”

“expect”

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

“may,”

“could,”

“should,”

etc.), or similar expressions, identify these forward-looking statements.

These forward-looking statements are subject to risks and uncertainties including those under “Risk Factors”

1A in this Form 10-K that could cause actual results or events to differ materially from those expressed or implied by the forward-looking

Our actual results and the timing of events could differ materially from those anticipated in these forward-looking

statements as a result of several factors.

We do not undertake any obligation to update forward-looking statements to reflect events

or circumstances occurring after the filing date of this report.

Historical Background

We are a specialty pharmaceutical company dedicated to the development

and commercialization of critical care products targeting unmet needs with a focus on anti-infectives, cancer care and unique prescription

On September 12, 2014, we acquired Citius Pharmaceuticals, LLC as a wholly-owned subsidiary.

On March 30, 2016, we acquired all of the outstanding stock

of Leonard-Meron Biosciences, Inc.

(“LMB”) by issuing shares of its common stock.

We acquired identifiable intangible

assets of $19,400,000 related to in-process research and development and recorded goodwill of $9,346,796 for the excess of the

purchase consideration over the net assets acquired.

In-process research and development

represents the value of LMB’s leading drug candidate, which is an antibiotic solution used to treat catheter-related

bloodstream infections.

Goodwill represents the value of LMB’s industry relationships and its assembled workforce.

In-process research and development is expected to be amortized on a straight-line basis over a period of eight years

commencing upon revenue generation.

Goodwill will not be amortized, but will be tested at least annually for impairment.

On September 11, 2020, we formed NoveCite, Inc.

(“NoveCite”),

a Delaware corporation, of which we own 75% of the issued and outstanding capital stock.

Through September 30, 2020, we have devoted substantially all

of our efforts to product development, raising capital, building infrastructure through strategic alliances and coordinating activities

relating to our proprietary products.

We have not yet realized any revenues from its operations.

Patent and Technology License Agreements

Mino-Lok®

- LMB has a patent and technology license

agreement with Novel Anti-Infective Therapeutics, Inc.

(“NAT”) to develop and commercialize Mino-Lok on an exclusive,

worldwide sub-licensable basis, as amended.

Since May 2014, LMB has paid an annual maintenance fee, which began at $30,000 and

that increased over five years to $90,000, where it will remain until the commencement of commercial sales of a product subject

to the license.

LMB will also pay annual royalties on net sales of licensed products, with royalties ranging from the mid-single

digits to the low double digits.

In limited circumstances in which the licensed product is not subject to a valid patent claim

and a competitor is selling a competing product, the royalty rate is in the low single digits.

After a commercial sale is obtained,

LMB must pay minimum aggregate annual royalties that increase in subsequent years.

LMB must also pay NAT up to $1,100,000 upon

achieving specified regulatory and sales milestones.

Finally, LMB must pay NAT a specified percentage of payments received from

any sub licensees.

Mino-Wrap - On January 2, 2019, we entered into a patent

and technology license agreement with the Board of Regents of the University of Texas System on behalf of the University of Texas

Anderson Cancer Center (“Licensor”), whereby we in-licensed exclusive worldwide rights to the patented technology

for any and all uses relating to breast implants.

We intend to develop a liquefying gel-based wrap containing minocycline

and rifampin for the reduction of infections associated with breast implants following breast reconstructive surgeries.

are required to use commercially reasonable efforts to commercialize Mino-Wrap under several regulatory scenarios and achieve milestones

associated with these regulatory options leading to an approval from the FDA.

Under the license agreement, we paid

a nonrefundable upfront payment of $125,000.

We are obligated to pay an annual maintenance fee of $30,000, commencing in

January 2020 that increases annually by $15,000 per year up to a maximum of $90,000.

Annual maintenance fees cease on the

first sale of product.

We also must pay up to an aggregate of $2.1 million in milestone payments, contingent on the

achievement of various regulatory and commercial milestones.

Under the terms of the license agreement, we also must pay a

royalty of mid- to upper-single digit percentages of net sales, depending on the amount of annual sales, and subject to

downward adjustment to lower- to mid-single digit percentages in the event there is no valid patent for the product in the

United States at the time of sale.

After the first sale of product, we will owe an annual minimum royalty payment of $100,000

that will increase annually by $25,000 for the duration of the term.

We will be responsible for all patent expenses incurred

by Licensor for the term of the agreement although Licensor is responsible for filing, prosecution and maintenance of all

NoveCite –

On October 6, 2020, our subsidiary NoveCite

entered into a license agreement with Novellus Therapeutics Limited (“Licensor”), whereby NoveCite acquired an exclusive,

worldwide license, with the right to sublicense, to develop and commercialize a stem cell therapy based on the Licensor’s

patented technology for the treatment of acute pneumonitis of any etiology in which inflammation is a major agent in humans.

execution of the license agreement, NoveCite paid an upfront payment of $5,000,000 to Licensor and issued to Licensor shares of

Novecite’s common stock representing 25% of NoveCite’s currently outstanding equity.

We own the other 75% of NoveCite’s

currently outstanding equity.

Pursuant to the terms of the stock subscription agreement between Novellus and NoveCite, if NoveCite

issues additional equity, subject to certain exceptions, NoveCite must maintain Novellus’s ownership at 25% by issuing additional

shares to Novellus.

Under the license agreement, NoveCite is obligated to pay Licensor

up to an aggregate of $51,000,000 in regulatory and developmental milestone payments.

NoveCite also must pay a royalty equal to

low double-digit percentages of net sales, commencing upon the first commercial sale of a licensed product.

This royalty is subject

to downward adjustment on a product-by-product and country-by-country basis to an upper-single digit percentage of net sales in

any country in the event of the expiration of the last valid patent claim or if no valid patent claim exists in that country.

royalty will end on the earlier of (i) date on which a biosimilar product is first marketed, sold, or distributed by Licensor or

any third party in the applicable country or (ii) the 10 year anniversary of the date of expiration of the last-to-expire valid

patent claim in that country.

In the case of a country where no licensed patent ever exists, the royalty will end on the later

of (i) the date of expiry of such licensed product’s regulatory exclusivity and (ii) the 10 year anniversary of the date

of the first commercial sale of the licensed product in the applicable country.

In addition, NoveCite will pay to Licensor an amount

equal to a mid-twenties percentage of any sublicensee fees it receives.

Under the terms of the license agreement, in the event that

Licensor receives any revenue involving the original cell line included in the licensed technology, then Licensor shall remit to

NoveCite 50% of such revenue.

Results of Operations for Year Ended September 30, 2020 compared

to Year Ended September 30, 2019

September 30,

Operating expenses:

Research and development

General and administrative

Stock-based compensation –

general and administrative

Total operating expenses

Operating loss

(17,710,685 )

(15,598,361 )

Interest income

Interest expense

$ (17,548,085 )

$ (15,562,144 )

We did not generate any revenues for the years ended September

30, 2020 and 2019.

Research and Development Expenses

For the year ended September 30, 2020, research and development

expenses were $8,812,810 as compared to $8,596,898 for the year ended September 30, 2019, an increase of $215,912.

development costs for Mino-Lok®

decreased by $941,266 to $6,207,018 for the year ended September 30, 2020 as compared to $7,148,284

for the year ended September 30, 2019.

Research and development costs for our Halo-Lido product candidate increased by $322,429

to $1,646,043 for the year ended September 30, 2020 as compared to $1,323,614 for the year ended September 30, 2019.

development costs for our Mino-Wrap product candidate decreased by $11,483 to $113,517 for the year ended September 30, 2020 as

compared to $125,000 during the year ended September 30, 2019.

During the year ended September 30, 2020, research and development

costs for our new proposed novel cellular therapy for acute respiratory distress syndrome (ARDS) were $846,232.

We expect that research and development expenses will continue

to increase in fiscal 2021 as we continue to focus on our Phase 3 trial for Mino-Lok®, progress the Halo-Lido product candidate,

and accelerate our research and development efforts related to ARDS and Mino-Wrap.

We are actively seeking to raise additional

capital in order to fund our research and development efforts.

General and Administrative Expenses

For the year ended September 30, 2020, general and administrative

expenses were $8,094,614 as compared to $6,285,480 for the year ended September 30, 2019 an increase of $1,809,134.

administrative expenses consist primarily of compensation costs, consulting fees incurred for financing activities and corporate

development services, and investor relations expenses.

Compensation expense increased primarily due to the hiring of our new Chief

Medical Officer in July 2020.

During the year ended September 30, 2020, the Company issued $528,770 in common stock for investor

relations and other consulting services, and incurred additional legal and business advisory expenses.

Stock-based Compensation Expense

For the year ended September 30, 2020, stock-based compensation

expense was $803,261 as compared to $715,983 for the year ended September 30, 2019.

Stock-based compensation expense increased

by $87,278 in comparison to the prior period as we granted an option to our new Chief Medical Officer and additional options to

consultants, directors and employees.

At September 30, 2020, unrecognized total compensation cost related to unvested options of

$1,166,073 is expected to be recognized over a weighted average period of 1.90 years.

Other Income (Expense)

During the year ended September 30, 2020, the Company earned

$68,066 of interest income compared to $52,660 of interest income during the year ended September 30, 2019.

We have temporarily

invested some of the proceeds of our recent equity offerings.

During the year ended September 30, 2020, the Company recorded as

other income a $110,207 refund received from the FDA for 2016 product and establishment fees.

The fees previously paid by the Company

exceeded the costs of the FDA’s review of the associated applications.

Interest expense for the year ended September 30, 2020 was $15,673

as compared to $16,443 for the year ended September 30, 2019.

Interest expense for both years is primarily for the notes payable

to related parties that were acquired in the acquisition of LMB.

During the year ended September 30, 2020, we also accrued $741

in interest expense on the COVID-related Small Business Administration (“SBA”) paycheck protection program loan received

on April 15, 2020.

For the year ended September 30, 2020, we incurred a net loss

of $17,548,085 compared to a net loss of $15,562,144 for the year ended September 30, 2019.

The $1,985,941 increase in the

net loss was primarily due to the $1,809,134 increase in general and administrative expenses.

LIQUIDITY AND CAPITAL RESOURCES

Going Concern Uncertainty and Working Capital

Citius has incurred losses of $17,548,085 and $15,562,144 for

the years ended September 30, 2020 and 2019, respectively.

At September 30, 2020, Citius had an accumulated deficit of $70,593,867.

Citius’

net cash used in operations during the years ended September 30, 2020 and 2019 was $16,930,658 and $12,437,751, respectively.

The independent registered public accounting firm report on

our September 30, 2020 consolidated financial statements contains an emphasis of a matter regarding substantial doubt about our

ability to continue as a going concern and that the consolidated financial statements have been prepared assuming we will continue

as a going concern and do not include any adjustments to reflect the possible future effects on the recoverability and classification

of assets, or the amounts and classification of liabilities that may result if we do not continue as a going concern.

As of September 30, 2020, Citius had working capital of $9,884,852.

Our limited working capital was attributable to the operating losses incurred by the Company since inception offset by our capital

raising activities.

At September 30, 2020, Citius had cash and cash equivalents of $13,859,748 available to fund its operations.

The Company’s only source of cash flow since inception has been from financing activities.

During the years ended September

30, 2020 and 2019, the Company received net proceeds of $22,733,850 and $11,147,552, respectively, from the issuance of equity.

We also received $164,583 from the COVID-related SBA paycheck protection program loan received on April 15, 2020.

Our primary uses

of operating cash were for product development and commercialization activities, regulatory expenses, employee compensation, consulting

fees, legal and accounting fees, and insurance expense.

Financing Activities

In December 2019, 1,060,615 of the September 2019 Offering Pre-Funded

Unit Warrants were exercised at $0.0001 per share for net proceeds of $106.

In January 2020, investors who participated in the September

2019 Offering exercised 1,315,715 warrants at $0.77 per share resulting in net proceeds of $1,013,101 to the Company.

On February 14, 2020, the Company entered into a warrant exercise

agreement for 3,712,218 shares of common stock having an exercise price of $0.77 and 2,586,455 shares of common stock at a reduced

exercise price of $1.02.

The offering closed on February 19, 2020 and net proceeds were $5,013,930 after placement agent fees and

offering expenses.

On May 18, 2020, the Company closed a registered direct offering

for the sale of 7,058,824 shares of common stock at $1.0625 per share for gross proceeds of $7,500,001.

The Company also agreed

to issue 3,529,412 unregistered immediately exercisable warrants to the investors with an exercise price of $1.00 per share and

a term of five and one-half years.

Net proceeds from the offering were $6,877,100.

On June 26, 2020, 1,129,412 of the May 2020 Registered Direct

Offering Investor Warrants were exercised at $1.00 per share for net proceeds of $1,129,412.

On August 10, 2020, the Company closed an underwritten public

offering of 9,159,524 shares of common stock at $1.05 per share for gross proceeds of $9,617,500.

The Company paid the underwriter

a fee of 7% of the gross proceeds totaling $673,225 and issued the underwriter 641,166 immediately exercisable warrants with an

exercise price of $1.3125 per share and a term of five years.

The Company also reimbursed the placement agent for $135,000 in expenses

and incurred $109,074 in other expenses.

Net proceeds from the offering were $8,700,201.

We expect that we will have sufficient capital to continue our

operations through March 2021.

We plan to raise additional capital in the future to support our operations.

There is no assurance,

however, that we will be successful in raising the needed capital or that proceeds, if any, will be sufficient enough or received

in a timely manner to fully support our operations.

While the COVID-19 pandemic has adversely impacted the progress of our clinical

trials and operations, as of the date of this report, the Company has been able to access the capital markets and successfully

complete financing transactions.

However, we cannot be certain that any future impact of COVID-19 on our operations will not negatively

impact our ability to raise capital.

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.

CRITICAL ACCOUNTING POLICIES

Our discussion and analysis of our financial condition and results

of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally

accepted in the United States.

The preparation of these financial statements requires us to make estimates and judgments that affect

the reported amounts of assets, liabilities and expenses and related disclosure of contingent assets and liabilities.

our estimates on an ongoing basis.

We base our estimates on historical experience and on various other factors that we believe

to be reasonable under the circumstances.

Actual results may differ from these estimates.

We believe the judgments and estimates

required by the following accounting policies to be critical in the preparation of our financial statements.

Research and Development

Research and development costs, including upfront fees and milestones

paid to collaborators who are performing research and development activities under contractual agreement with us, are expensed

We defer and capitalize our nonrefundable advance payments that are for research and development activities until

the related goods are delivered or the related services are performed.

When we are reimbursed by a collaboration partner for work

we perform, we record the costs incurred as research and development expenses and the related reimbursement as a reduction to research

and development expenses in our statement of operations.

Research and development expenses primarily consist of clinical and non-clinical

studies, materials and supplies, third-party costs for contracted services, and payments related to external collaborations and

other research and development related costs.

In-process Research and Development and Goodwill

In process research and development represents the value of

LMB’s leading drug candidate, Mino-Lok, an antibiotic lock solution in Phase 3 clinical development, which if approved, would

be used to assist in the treatment of catheter related bloodstream infections and is expected to be amortized on a straight-line

basis over eight years upon revenue generation.

Goodwill represents the value of LMB’s industry relationships and its assembled

Goodwill will not be amortized and will be tested at least annually for impairment.

The Company reviews intangible assets annually to determine

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

useful life of any intangible asset.

If the carrying value of an asset exceeds its undiscounted cash flows, the Company writes

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

No impairment has occurred since the acquisition through September 30, 2020.

The Company evaluates the recoverability of goodwill annually

or more frequently if events or changes in circumstances indicate that the carrying value of an asset might be impaired, in accordance

with Accounting Standard Update (“ASU”) 2017-04, Intangibles –

Goodwill and Other (Topic 350):

the Accounting for Goodwill Impairment .

Goodwill is first qualitatively assessed to determine whether further impairment testing

is necessary.

Factors that management considers in this assessment include macroeconomic conditions, industry and market considerations,

overall financial performance (both current and projected), changes in management and strategy and changes in the composition or

carrying amount of net assets.

If this qualitative assessment indicates that it is more likely than not that the fair value of

a reporting unit is less than its carrying amount, a one-step test is then performed in accordance with ASU 2017-04.

simplified model, a goodwill impairment is calculated as the difference between the carrying amount of the reporting unit and its

The Company performed a qualitative assessment for its 2020

analysis of goodwill.

Based on this assessment, management does not believe that it is more likely than not that the carrying value

of the reporting unit exceeds its fair value.

Accordingly, no further testing was performed as management believes that there are

no impairment issues with respect to goodwill as of September 30, 2020.

We follow accounting guidance regarding the recognition, measurement,

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

Tax positions taken or expected to be taken

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

of being sustained by the applicable tax authorities.

Tax positions not deemed to meet a more-likely-than-not threshold would be

recorded in the financial statements.

We recognize deferred tax assets and liabilities based on differences

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

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

We provide a valuation allowance for deferred tax assets for which

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

Quantitative and Qualitative Disclosures About Market

Not required.

We did not make any purchases of our common stock

during the three months ended September 30, 2021, which is the fourth quarter of our fiscal year.

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

What changed 10-K

Item 5. Market for Registrant’s Common Equity