What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-12-22 compared with 2021-12-15 · 173 added, 251 removed, 783 unchanged (35% of the section changed)

Financial Statements and Supplementary

Financial Statements and Supplementary Data

CITIUS PHARMACEUTICALS, INC.

CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Changes in Stockholders’ Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC

ACCOUNTING FIRM

Report of Independent Registered Public Accounting Firm (PCAOB ID # 392 ) F-2

Consolidated Balance Sheets F-3

Consolidated Statements of Operations F-4

Consolidated Statements of Changes in Stockholders’ Equity F-5

Consolidated Statements of Cash Flows F-6

Notes to Consolidated Financial Statements F-7

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the Stockholders and Board of Directors of

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$ 113,999,302

$ 142,429,059

LIABILITIES AND STOCKHOLDERS’ EQUITY

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Accrued compensation

Accrued interest

Notes payable – related parties

Operating lease liability

Total Current Liabilities

Note payable – paycheck protection program

Deferred tax liability

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$ 113,999,302

See accompanying report of independent registered

public accounting firm and notes to the consolidated financial statements.

$ 142,429,059

The accompanying notes are an integral part of

these consolidated financial statements.

CITIUS PHARMACEUTICALS, INC.

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Total Other Income, Net

Loss before Income Taxes

( 33,064,646 )

( 23,054,434 )

Income tax expense

( 33,640,646 )

( 23,054,434 )

Deemed dividend on warrant extension

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Basic and diluted

See accompanying report of independent registered

public accounting firm and notes to the consolidated financial statements.

The accompanying notes are an integral part of

these consolidated financial statements.

CITIUS PHARMACEUTICALS, INC.

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FOR THE YEARS ENDED SEPTEMBER 30, 2022 AND 2021

Pharmaceuticals,

Citius Pharmaceuticals, Inc.

Shareholder’s

Non-Controlling

Balance, October 1, 2019

October 1, 2020

$ 104,208,958

Issuance of common stock upon exercise of warrants

Issuance of common stock for services

Issuance of common stock in registered direct offering, net of costs of $ 622,900

Issuance of common stock in underwritten offering, net of costs of $ 917,299

Stock-based compensation expense

$ ( 70,593,867 )

of NoveCite common stock

( 2,399,520 )

Issuance of common stock in private placement offering, net of costs of $ 1,549,602

Issuance of common stock in registered direct offering, net of costs of $ 5,520,160

of common stock upon exercise of warrants

of common stock for services

of common stock upon exercise of stock options

compensation expense

( 23,054,434 )

Balance, September 30, 2020

( 23,054,434 )

Issuance of NoveCite common stock

( 23,054,434 )

Issuance of common stock in private placement offering, net of costs of $ 1,549,602

Issuance of common stock in registered direct offering, net of costs of $ 5,520,160

Issuance of common stock upon exercise of warrants

Issuance of common stock for services

Issuance of common stock upon exercise of stock options

Stock-based compensation expense

September 30, 2021

( 96,047,821 )

of common stock for services

compensation expense

( 33,640,646 )

Balance, September 30, 2021

( 33,640,646 )

September 30, 2022

$ 232,368,121

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$ 102,825,865

See accompanying report of independent registered

public accounting firm and notes to the consolidated financial statements.

$ 103,426,245

The accompanying notes are an integral part of

these consolidated financial statements.

CITIUS PHARMACEUTICALS, INC.

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Amortization of operating lease right-of-use asset

Deferred income tax expense

Gain from forgiveness of notes payable – paycheck protection program and accrued interest

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Cash Flows From Financing Activities:

Proceeds from notes payable – paycheck protection program

Principal paid on notes payable – related parties

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Proceeds from common stock option exercises

Net proceeds from underwritten offerings

Net proceeds from private placement

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Net Change in Cash and Cash Equivalents

( 28,361,256 )

Cash and Cash Equivalents – Beginning of Year

Cash and Cash Equivalents – End of Year

Supplemental Disclosures of Cash Flow Information and Non-cash Activities:

Operating lease right-of-use asset and liability recorded upon adoption of ASC 842

See accompanying report of independent registered

public accounting firm and notes to the consolidated financial statements.

The accompanying notes are an integral part of

these consolidated financial statements.

CITIUS PHARMACEUTICALS, INC.

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Citius Pharmaceuticals, Inc.

the “Company” or “we”) is a specialty pharmaceutical company dedicated to the development and commercialization

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

the “Company” or “we”) is a late-stage biopharmaceutical company dedicated to the development and commercialization

of critical care products with a focus on oncology, anti-infectives in adjunct cancer care, unique prescription products and stem cell

On March 30, 2016, Citius acquired Leonard-Meron

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(“LMB”) as a wholly-owned subsidiary.

The Company acquired all of the outstanding stock of LMB by issuing

shares of its common stock.

The net assets acquired included identifiable intangible assets of $ 19,400,000 related to in-process research

and development.

The Company acquired all the outstanding stock of LMB by issuing shares

of its common stock.

The net assets acquired included identifiable intangible assets of $ 19,400,000 related to in-process research and

The Company recorded goodwill of $ 9,346,796 for the excess of the purchase price over the net assets acquired.

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On August 23, 2021, we formed Citius Acquisition

Corp., a wholly owned subsidiary in conjunction with the acquisition of I/ONTAK, but no activity has occurred to date.

(“Citius Acq.”), a wholly-owned subsidiary in conjunction with the acquisition of I/ONTAK, which began operations in

In-process research and development (“IPR&D)

consists of i) $ 19,400,000 acquisition value of of LMB’s leading drug candidate (Mino-Lok), which is an antibiotic solution used

to treat catheter-related bloodstream infections and is expected to be amortized on a straight-line basis over a period of eight years

commencing upon revenue generation, and ii) $ 40,000,000 acquisition value of the exclusive license for E7777 (denileukin diftitox), a

late-stage oncology immunotherapy for the treatment of CTCL, a rare form of non-Hodgkin lymphoma and is expected to be amortized on a

straight-line basis over a period of twelve years commencing upon revenue generation.

Goodwill of $ 9,346,796 represents the value of LMB’s

industry relationships and its assembled workforce.

consists of i) $ 19,400,000 acquisition value of LMB’s leading drug candidate (Mino-Lok), which is an antibiotic solution used to

treat catheter-related bloodstream infections and is expected to be amortized on a straight-line basis over a period of eight years commencing

upon revenue generation, and ii) $ 40,000,000 acquisition value of the exclusive license for E7777 (denileukin diftitox), a late-stage

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

basis over a period of twelve years commencing upon revenue generation.

Goodwill of $ 9,346,796 represents the value of LMB’s industry

relationships and its assembled workforce.

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

Since its inception, the Company has devoted substantially

all of its efforts to business planning, research and development, recruiting management and technical staff, and raising capital.

all its efforts to business planning, research and development, recruiting management and technical staff, and raising capital.

is subject to a number of risks common to companies in the pharmaceutical industry including, but not limited to, risks related to the

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include the operations of Citius Pharmaceuticals, Inc., and its wholly-owned subsidiaries, Citius Pharmaceuticals, LLC, LMB and Citius

Acquisition Corp., and its majority-owned subsidiary NoveCite.

Acq., and its majority-owned subsidiary NoveCite.

NoveCite, was inactive until October 2020.

Citius Acquisition Corp.

inactive at September 30, 2021.

began operations in April 2022.

All significant inter-company balances and transactions have been eliminated in consolidation.

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30, 2022 and 2021, respectively.

As a result of the Company’s common stock offerings and common stock warrant exercises during the

year ended September 30, 2021, the Company had working capital of approximately $ 68,800,000 at September 30, 2021.

The Company had working capital of approximately $ 40 million at September 30, 2022.

The Company estimates

that its available cash resources will be sufficient to fund its operations through March 2023.

that its available cash resources will be sufficient to fund its operations through December 2023.

The Company has generated no operating revenue

to date and has principally raised capital through the issuance of debt and equity instruments to finance its operations.

Company’s continued operations beyond March 2023, including its development plans for Mino-Lok, Mino-Wrap, Halo-Lido, Novecite and

E7777, will depend on its ability to obtain regulatory approval to market Mino-Lok and generate substantial revenue from the sale of Mino-Lok

and on its ability to raise additional capital through various potential sources, such as equity and/or debt financings, strategic relationships,

or out-licensing of its product candidates.

However, the Company can provide no assurances on regulatory approval, commercialization or

future sales of Mino-Lok or that financing or strategic relationships will be available on acceptable terms, or at all.

If the Company

is unable to raise sufficient capital, find strategic partners or generate substantial revenue from the sale of Mino-Lok, there would

be a material adverse effect on its business.

Further, the Company expects in the future to incur additional expenses as it continues

to develop its product candidates, including seeking regulatory approval, and protecting its intellectual property.

Company’s continued operations beyond December 2023, including its development plans for E7777, Mino-Lok, Mino-Wrap, Halo-Lido and

NoveCite, will depend on its ability to obtain regulatory approval to market E7777 and/or Mino-Lok and generate substantial revenue from

the sale of E7777 and/or Mino-Lok and on its ability to raise additional capital through various potential sources, such as equity and/or

debt financings, strategic relationships, or out-licensing of its product candidates.

However, the Company can provide no assurances on

regulatory approval, commercialization, or future sales of E7777 and/or Mino-Lok or that financing or strategic relationships will be

available on acceptable terms, or at all.

If the Company is unable to raise sufficient capital, find strategic partners or generate substantial

revenue from the sale of Mino-Lok, there would be a material adverse effect on its business.

Further, the Company expects in the future

to incur additional expenses as it continues to develop its product candidates, including seeking regulatory approval, and protecting

its intellectual property.

PATENT AND TECHNOLOGY LICENSE AGREEMENTS

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fees it receives.

Under the terms of the license agreement, in the

event that Novellus receives any revenue involving the original cell line included in the licensed technology, then Novellus shall remit

to NoveCite 50 % of such revenue.

The term of the license agreement will continue

on a country-by-country and licensed product-by-licensed product basis until the expiration of the last-to-expire royalty term.

party may terminate the license agreement upon written notice if the other party is in material default.

Under the terms of the license agreement, if Novellus

receives any revenue involving the original cell line included in the licensed technology, then Novellus shall remit to NoveCite 50 % of

such revenue.

The term of the license agreement continue on

a country-by-country and licensed product-by-licensed product basis until the expiration of the last-to-expire royalty term.

may terminate the license agreement upon written notice if the other party is in material default.

NoveCite may terminate the license

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Novellus will be responsible for preparing, filing,

prosecuting and maintaining all patent applications and patents included in the licensed patents in the territory, provided however, that

if Novellus decides that it is not interested in maintaining a particular licensed patent or in preparing, filing, or prosecuting a licensed

patent, NoveCite will have the right, but not the obligation, to assume such responsibilities in the territory at NoveCite’s sole

cost and expense.

prosecuting, and maintaining all patent applications and patents included in the licensed patents in the territory, provided however,

that if Novellus decides that it is not interested in maintaining a particular licensed patent or in preparing, filing, or prosecuting

a licensed patent, NoveCite will have the right, but not the obligation, to assume such responsibilities in the territory at NoveCite’s

sole cost and expense.

In July 2021, Novellus was acquired by Brooklyn.

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to allow Brooklyn to maintain its then percentage ownership.

In October 2021, Brooklyn changed its name to Eterna Therapeutics Inc.

License Agreement with Eisai

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

Under the license agreement, Eisai is to receive a $6.0 million development

milestone payment upon initial approval and additional commercial milestone payments related to the achievement of net product sales thresholds

(which increases to $7 million in the event we have exercised our option to add India to the licensed territory prior to FDA approval)

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

We also are required to reimburse Eisai

for up to $2.65 million of its costs to complete the ongoing Phase 3 pivotal clinical trial for I/ONTAK for the CTCL indication and reimburse

Eisai for all reasonable costs associated with the preparation of a BLA for I/ONTAK.

Eisai will be responsible for completing the current

CTCL clinical trial, and chemistry, manufacturing and controls (CMC) activities through the filing of a BLA for E7777 with the FDA.

will be responsible for development costs associated with potential additional indications.

Under the license agreement, Eisai is to receive

a $6.0 million development milestone payment upon initial approval and additional commercial milestone payments related to the achievement

of net product sales thresholds (which increases to $7 million in the event we have exercised our option to add India to the licensed

territory prior to FDA approval) and an aggregate of up to $22 million related to the achievement of net product sales thresholds.

also are required to reimburse Eisai for up to $2.65 million of its costs to complete the ongoing Phase 3 pivotal clinical trial for I/ONTAK

for the CTCL indication and reimburse Eisai for all reasonable costs associated with the preparation of a BLA for I/ONTAK.

be responsible for completing the current CTCL clinical trial, and chemistry, manufacturing, and controls (CMC) activities through the

filing of a BLA for E7777 with the FDA.

Citius will be responsible for development costs associated with potential additional indications.

The term of the license

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transaction with the clinical research and manufacturing organization are at market rates and could be provided by multiple vendors in

the marketplace Therefore, there is no fair value associated with the contracts acquired.

the marketplace.

Therefore, there is no fair value associated with the contracts acquired.

Incremental costs incurred on IPR&D after

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Stock-Based Compensation

The Company recognizes compensation costs

resulting from the issuance of stock-based awards to employees and directors as an expense in the consolidated statement of operations

over the requisite service period based on the fair value for each stock award on the grant date.

The fair value of each option grant

is estimated as of the date of grant using the Black-Scholes option pricing model.

The Company estimates volatility using the trading

activity of its common stock.

Because the Company’s stock options have characteristics significantly different from those of traded

options, and because changes in the input assumptions can materially affect the fair value estimate, the existing model may not necessarily

provide a reliable single measure of fair value of the Company’s stock options.

The Company recognizes compensation costs resulting

from the issuance of stock-based awards to employees and directors as an expense in the consolidated statement of operations over the

requisite service period based on the fair value for each stock award on the grant date.

The fair value of each option grant is estimated

as of the date of grant using the Black-Scholes option pricing model.

The Company estimates volatility using the trading activity of its

common stock.

Because the Company’s stock options have characteristics significantly different from those of traded options, and

because changes in the input assumptions can materially affect the fair value estimate, the existing model may not necessarily provide

a reliable single measure of fair value of the Company’s stock options.

The Company recognizes compensation costs resulting

from the issuance of stock-based awards to non-employees as an expense in the consolidated statement of operations over the service period

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concentration of credit risk such as foreign exchange contracts, option contracts or other hedging arrangements.

Recently Adopted Accounting Standards

In May 2021, the FASB issued ASU 2021-04 Earnings

Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718),

and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Issuer’s Accounting for Certain Modifications

or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force) .

The amendments

in this update are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within

those fiscal years.

Early application is permitted, including in an interim period as of the beginning of the fiscal year that includes

that interim period.

The Company adopted the provisions of ASU 2021-04 in the quarter beginning April 1, 2021.

Recently Issued Accounting Standards

In August 2020, FASB issued ASU 2020-06, Debt — Debt

In August 2020, the Financial Accounting

Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt

with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own

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particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation.

amendments in this ASU are effective for the public companies for fiscal years beginning after December 15, 2021,

amendments in this ASU are effective for public companies for fiscal years beginning after December 15, 2021,

including interim periods within those fiscal years.

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Under the new guidance (ASC 805-20-30-28), the acquirer should determine what contract assets and/or contract liabilities

it would have recorded under ASC 606 (the revenue guidance) as of the acquisition date, as if the acquirer had entered into the original

contract at the same date and on the same terms as the acquiree.

The recognition and measurement of those contract assets and contract

liabilities will likely be comparable to what the acquiree has recorded on its books under ASC 606 as of the acquisition date.

is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

ASU 2021-08 is effective

for the Company in the first quarter of fiscal 2024.

Early adoption is permitted, including in an interim period, for any period for which

financial statements have not yet been issued.

However, adoption in an interim period other than the first fiscal quarter requires an

entity to apply the new guidance to all prior business combinations that have occurred since the beginning of the annual period in which

the new guidance is adopted.

The Company is currently evaluating the adoption date of ASU 2021-08 and the impact, if any, adoption will

have on its financial position and results of operations.

it would have recorded under Accounting Standards Codification (“ASC”) 606 (the revenue guidance) as of the acquisition date,

as if the acquirer had entered into the original contract at the same date and on the same terms as the acquiree.

The recognition and

measurement of those contract assets and contract liabilities will likely be comparable to what the acquiree has recorded on its books

under ASC 606 as of the acquisition date.

ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, including interim

periods within those fiscal years.

ASU 2021-08 is effective for the Company in the first quarter of fiscal 2024.

Early adoption is permitted,

including in an interim period, for any period for which financial statements have not yet been issued.

However, adoption in an interim

period other than the first fiscal quarter requires an entity to apply the new guidance to all prior business combinations that have occurred

since the beginning of the annual period in which the new guidance is adopted.

The Company is currently evaluating the adoption date of

ASU 2021-08 and the impact, if any, adoption will have on its financial position and results of operations.

NOTES PAYABLE

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Interest expense on notes payable – related

parties for the years ended September 30, 2021 and 2020 was $ 9,606 and $ 14,932 , respectively.

parties for the year ended September 30, 2021 was $ 9,606 .

Paycheck Protection Program

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On April 15, 2020, the Company received $164,583 from the PPP through

Interest expense on the PPP loan was $ 1,233 and

$ 741 for the years ended September 30, 2021 and 2020, respectively.

Interest expense on the PPP loan was $ 1,233 for

the year ended September 30, 2021.

On July 28, 2021, the Small Business Administration

(“SBA”) gave full forgiveness of the PPP loan.

The Company recorded a gain from debt extinguishment of $ 166,557 consisting

of the principal balance and related accrued interest expense.

gave full forgiveness of the PPP loan.

The Company recorded a gain from debt extinguishment of $ 166,557 consisting of the principal balance

and related accrued interest expense.

COMMON STOCK, STOCK OPTIONS AND WARRANTS

Authorized Common Stock

On June 21, 2021, our stockholders approved an

amendment to our Articles of Incorporation to increase the authorized number of shares of capital stock from 210,000,000 to 410,000,000

and the authorized number of common shares from 200,000,000 to 400,000,000 .

Common Stock Issued for Services

On November 4, 2019, the Company issued 186,566

shares of common stock for strategic consulting and corporate development services and expensed the $ 100,000 fair value of the common

stock issued.

On February 12, 2021, the Company issued 50,000

shares of common stock for investor relations services and 136,000 shares of common stock for general advisory and business development

advisory services.

The Company expensed the $ 306,020 fair value of the common stock issued.

On April 6, 2020, the Company issued 50,000 shares

of common stock for strategic consulting and corporate development services and expensed the $ 22,750 fair value of the common stock issued.

On September 8, 2020, the Company issued 101,174

shares of common stock for investor relations services and expensed the $ 68,000 fair value of the common stock issued.

On February 12, 2021, the Company issued 50,000

On November 2, 2021, the Company issued 50,201

shares of common stock for investor relations services and expensed the $ 95,884 fair value of the common stock issued.

On March 21, 2022, the Company issued 100,000

shares of common stock for media, public and investor relations services and expensed the $ 178,000 fair value of the common stock issued.

On September 13, 2022, the Company issued 81,500

shares of common stock for media, public and investor relations services and expensed the $ 104,320 fair value of the common stock issued.

Common Stock Offerings

On May 18, 2020, the Company closed a registered

direct offering with several institutional and accredited investors 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 issued 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.

The Company paid the placement agent for the offering a fee

of 7% of the gross proceeds totaling $525,000 and issued the placement agent 494,118 immediately exercisable warrants with an exercise

price of $1.3281 per share and a term of five years.

The Company also reimbursed the placement agent for $85,000 in expenses and incurred

$12,901 in other expenses.

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

The estimated fair value of the 3,529,412 warrants issued to

the investors was $2,138,998 and the estimated fair value of the 494,118 warrants issued to the placement agent was $275,724.

On August 10, 2020, the Company closed an underwritten

public offering of 9,159,524 shares of common stock at a price of $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 underwriters 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.

The estimated fair value of the 641,166 warrants

issued to the underwriter was $569,426.

On January 27, 2021, the Company closed a private

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Outstanding at September 30, 2021

Forfeited or expired

Outstanding at September 30, 2022

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the options granted during the year ended September 30, 2021 was estimated at $ 1.34 per share.

All of these options vest over terms of

All these options vest over terms of 12

to 36 months and have a term of 10 years.

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the options granted during the year ended September 30, 2022 was estimated at $ 1.67 per share.

All of these options vest over terms of

All these options vest over terms of 12

to 36 months and have a term of 10 years.

Stock-based compensation expense for the years

ended September 30, 2021 and 2020 was $1,454,979 (including $83,555 for the NoveCite Stock Plan) and $803,261, respectively.

ended September 30, 2022 and 2021 was $3,905,954 (including $133,332 for the NoveCite Stock Plan) and $1,454,979 (including $83,555 for

the NoveCite Stock Plan), respectively.

At September 30, 2022, unrecognized total compensation

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On November 5, 2020, the stockholders of NoveCite,

Inc., approved NoveCite’s Stock Plan and under which 2,000,000 common shares of NoveCite were reserved.

The NoveCite Stock Plan

provides incentives to employees, directors, and consultants through grants of options, SARs, dividend equivalent rights, restricted stock,

restricted stock units, or other rights.

As of September 30, 2021, there were options outstanding to purchase 2,000,000 common shares

of NoveCite and no common shares of NoveCite available for future grants.

approved NoveCite’s Stock Plan and under which 2,000,000 common shares of NoveCite were reserved.

The NoveCite Stock Plan provides

incentives to employees, directors, and consultants through grants of options, SARs, dividend equivalent rights, restricted stock, restricted

stock units, or other rights.

As of September 30, 2022, there were options outstanding to purchase 2,000,000 common shares of NoveCite

and no common shares of NoveCite available for future grants.

During the year ended September 30, 2021, NoveCite

granted options to purchase 2,000,000 common shares to employees at a weighted average exercise price of $ 0.24 per share, of which none

granted options to purchase 2,000,000 common shares to employees at a weighted average exercise price of $0.24 per share, of which 1,084,444

are exercisable as of September 30, 2022.

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30, 2021 was estimated at $0.20 per share.

All of these options vest over 36 months and have a term of 10 years.

The weighted average

remaining contractual term of options outstanding under the NoveCite Stock Plan is 9.39 years.

At September 30, 2021, unrecognized total

compensation cost related to unvested awards under the NoveCite Stock Plan of $316,445 is expected to be recognized over a weighted average

period of 2.42 years.

All these options vest over 36 months and have a term of 10 years.

The weighted average remaining

contractual term of options outstanding under the NoveCite Stock Plan is 8.39 years.

At September 30, 2022, unrecognized total compensation

cost related to unvested awards under the NoveCite Stock Plan of $183,111 is expected to be recognized over a weighted average period

of 1.45 years.

The Company has reserved 38,325,489 shares of

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Expiration Dates

March 24 – April 29, 2022

2016 Offering Warrants

November 23, 2021 – February 27, 2022

2017 Public Offering Investors

August 2, 2022

2017 Public Offering Underwriter

February 2, 2023

December 2017 Registered Direct/Private Placement Offering Investors

December 2017 Registered Direct/Private Placement Investors

June 19, 2023

December 2017 Registered Direct/Private Placement Offering Placement Agent

December 2017 Registered Direct/Private Placement Agent

December 19, 2022

March 2018 Registered Direct/Private Placement Offering Investors

March 2018 Registered Direct/Private Placement Investors

October 2, 2023

March 2018 Registered Direct/Private Placement Offering Placement Agent

March 2018 Registered Direct/Private Placement Agent

March 28, 2023

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August 8, 2023

April 2019 Registered Direct/Private Placement Offering Investors

April 2019 Registered Direct/Private Placement Investors

April 5, 2024

April 2019 Registered Direct/Private Placement Offering Placement Agent

April 2019 Registered Direct/Private Placement Agent

April 5, 2024

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February 19, 2026

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, 1,315,715 of the September 2019

Offering Investor Warrants were exercised at $ 0.77 per share for net proceeds of $ 1,013,101 .

On February 14, 2020, the Company entered into

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

shares of common stock at a reduced exercise price of $1.02.

In consideration for the exercise of the warrants for cash, the exercising

holders received new unregistered warrants to purchase 6,298,673 shares of common stock at an exercise price of $1.02 per share, exercisable

six months after issuance and which have a term of exercise equal to five years.

The offering closed on February 19, 2020 and net proceeds

were $5,013,930 after placement agent fees and offering expenses.

The Company also issued warrants to purchase 440,907 shares to the placement

The placement agent warrants have identical terms to the investor warrants except that the exercise price is $1.275 per share.

The estimated fair value of the 6,298,673 warrants issued to the investors was $5,360,465 and the estimated fair value of the 440,907

warrants issued to the placement agent was $367,022.

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 .

In April 2021, we extended the term by three years

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At September 30, 2022, the weighted average remaining

life of all of the outstanding warrants is 3.74 years, all warrants are exercisable, and the aggregate intrinsic value for the warrants

life of the outstanding warrants is 2.89 years, all warrants are exercisable, and the aggregate intrinsic value for the warrants

outstanding was $ 1,832,879 .

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for 1,294,498 warrants held by our Chairman and our Chief Executive Officer (see Note 6).

EMPLOYMENT AND CONSULTING AGREEMENTS

EMPLOYMENT AGREEMENTS

Employment Agreements

On October 19, 2017, the Company and its Chairman

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in the agreement.

On March 30, 2016, the Company entered into a

three-year employment agreement with Myron Holubiak to serve as Chief Executive Officer.

Upon expiration, the agreement automatically

renews for successive periods of one-year unless terminated pursuant to its terms.

On April 12, 2022, the Company entered into an

18-month employment agreement with Myron Holubiak to serve as Executive Vice Chairman.

Upon expiration, the agreement automatically renews

for successive periods of one-year unless terminated pursuant to its terms.

The agreement requires the Company to pay base compensation

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the occurrence of certain events as described in the agreement.

Consulting Agreements

Effective September 1, 2014, the Company entered

into three consulting agreements.

Two of the agreements were for financial services including accounting, preparation of financial statements

and filings with the SEC.

The third agreement was for financing activities, product development strategies and corporate development.

The agreements may be terminated by the Company or the consultant with 90 days written notice.

A consulting agreement for financial services

ended in February 2019 and the agreement for financing activities, product development strategies and corporate development ended in December

Consulting expense under the agreements for the

years ended September 30, 2021 and 2020 was $ 144,000 and $ 324,000 , respectively.

In November 2019, the Company received a $ 110,207

refund from the FDA for 2016 product and establishment fees because the fees paid by the Company exceeded the costs of the FDA’s

review of the associated applications.

The Company recorded the $ 110,207 as other income during the year ended September 30, 2020.

COMMITMENTS AND CONTINGENCIES

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excess of the base year expenses.

These costs are considered to be variable lease payments and are not included in the determination of

the lease’s right-of-use asset or lease liability.

These costs are variable lease payments and are not included in the determination of the lease’s

right-of-use asset or lease liability.

The Company identified and assessed the following

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capacities as such.

There was no provision for federal or state income

taxes for the years ended September 30, 2021 and 2020 due to the Company’s operating losses and the valuation reserve on deferred

The income tax benefit differs from the amount

of income tax determined by applying the U.S.

federal income tax rate to pretax income for the years ended September 30, 2021 and 2020

due to the following:

The Company recorded deferred income tax expense

of $ 576,000 for the year ended September 30, 2022 related to the amortization for taxable purposes of its in-process research and development

There was no provision for income taxes for the year ended September 30, 2021 due to the Company’s operating losses and the

valuation reserve on deferred tax assets.

The income tax expense (benefit) differs from

the amount of income tax determined by applying the U.S.

federal income tax rate to pretax income for the years ended September 30, 2022

and 2021 due to the following:

Computed “expected” tax benefit

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recorded by the Company to date.

SUBSEQUENT EVENTS

In November 2022, the Company was selected to

participate in New Jersey’s Technology Business Tax Certificate Transfer (NOL) Program, more commonly known as the Net Operating

Loss (NOL) Program, and will receive $ 3.6 million in non-dilutive capital through the New Jersey Economic Development Authority (NJEDA).

The Company expects to receive the funds by late 2022 or early 2023.

Changes in and Disagreements with Accountants

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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 8. Financial Statements and Supplementary Data