Citius Pharmaceuticals, Inc. 10-Q

Item 1. Financial Statements. CITIUS PHARMACEUTICALS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) June 30, September 30, 2025 2024 ASSETS Current Assets: Cash and cash equivalents $ 6,089,126 $ 3,251,880 Inventory 17,208,967 8,268,766 Prepaid expenses 1,313,176 2,700,000 Total Current Assets 24,611,269 14,220,646 Operating lease right-of-use asset, net 880,732 246,247 Deposits 38,062 38,062 In-process research and development 92,800,000 92,800,000 Goodwill 9,346,796 9,346,796 Total Other Assets 102,184,858 102,184,858 Total Assets $ 127,676,859 $ 116,651,751 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts payable $ 10,094,042 $ 4,927,211 License payable 28,400,000 28,400,000 Accrued expenses 8,523,675 17,027 Accrued compensation 3,710,041 2,229,018 Note payable 1,000,000 - Operating lease liability 114,694 241,547 Total Current Liabilities 51,842,452 35,814,803 Deferred tax liability 7,506,520 6,713,800 Operating lease liability - noncurrent 766,957 21,318 Total Liabilities 60,115,929 42,549,921 Commitments and Contingencies Stockholders’ Equity: Preferred stock - $ 0.001 par value; 10,000,000 shares authorized; no shares issued and outstanding - - Common stock - $ 0.001 par value; 250,000,000 and 16,000,000 shares authorized; 14,475,029 and 7,247,243 shares issued and outstanding at June 30, 2025 and September 30, 2024, respectively 14,475 7,247 Additional paid-in capital 295,888,916 271,440,421 Accumulated deficit ( 230,844,841 ) ( 201,370,218 ) Total Citius Pharmaceuticals, Inc. Stockholders’ Equity 65,058,550 70,077,450 Non-controlling interest 2,502,380 4,024,380 Total Equity 67,560,930 74,101,830 Total Liabilities and Equity $ 127,676,859 $ 116,651,751 See notes to unaudited condensed consolidated financial statements. Reflects a 1-for-25 reverse stock split effective November 25, 2024. 1 CITIUS PHARMACEUTICALS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2025 AND 2024 (Unaudited) Three Months Ended Nine Months Ended June 30, June 30, June 30, June 30, 2025 2024 2025 2024 Revenues $ — $ — $ — $ — Operating Expenses Research and development 1,621,325 2,763,865 7,514,888 8,991,673 General and administrative 4,447,008 4,808,551 14,626,882 12,755,190 Stock-based compensation – general and administrative 2,719,674 3,061,763 7,946,529 9,198,340 Total Operating Expenses 8,788,007 10,634,179 30,088,299 30,945,203 Operating Loss ( 8,788,007 ) ( 10,634,179 ) ( 30,088,299 ) ( 30,945,203 ) Other Income (Expense) Interest income 20,637 204,843 56,658 640,686 Gain on sale of New Jersey net operating losses — — — 2,387,842 Interest expense ( 172,262 ) — ( 172,262 ) — Total Other Income (Expense) ( 151,625 ) 204,843 ( 115,604 ) 3,028,528 Loss before Income Taxes ( 8,939,632 ) ( 10,429,336 ) ( 30,203,903 ) ( 27,916,675 ) Income tax expense 264,240 144,000 792,720 432,000 Net Loss ( 9,203,872 ) ( 10,573,336 ) ( 30,996,623 ) ( 28,348,675 ) Deemed dividend on warrant extension — 321,559 — 321,559 Net loss attributable to non-controlling interest 414,000 — 1,522,000 — Net loss applicable to common stockholders $ ( 8,789,872 ) $ ( 10,894,895 ) $ ( 29,474,623 ) $ ( 28,670,234 ) Net Loss Per Share - Basic and Diluted $ ( 0.80 ) $ ( 1.57 ) $ ( 3.27 ) $ ( 4.37 ) Weighted Average Common Shares Outstanding Basic and diluted 11,006,896 6,954,278 9,020,356 6,557,892 See notes to unaudited condensed consolidated financial statements. Reflects a 1-for-25 reverse stock split effective November 25, 2024. 2 CITIUS PHARMACEUTICALS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2025 AND 2024 (Unaudited) Preferred Common Stock Additional Paid-In Accumulated Total Citius Pharmaceuticals, Inc. Stockholders’ Non- Controlling Total Stock Shares Amount Capital Deficit Equity Interest Equity Balance, September 30, 2024 $ - 7,247,243 $ 7,247 $ 271,440,421 $ ( 201,370,218 ) $ 70,077,450 $ 4,024,380 $ 74,101,830 Issuance of common stock, net of costs - 480,000 480 2,573,571 - 2,574,051 - 2,574,051 Stock-based compensation expense - - - 2,524,824 - 2,524,824 - 2,524,824 Net loss - - - - ( 10,281,246 ) ( 10,281,246 ) - ( 10,281,246 ) Net loss attributable to non-controlling interest - - - - 513,000 513,000 ( 513,000 ) - Balance, December 31, 2024 - 7,727,243 7,727 276,538,816 ( 211,138,464 ) 65,408,079 3,511,380 68,919,459 Issuance of common stock, net of costs - 1,033,406 1,034 3,464,773 - 3,465,807 3,465,807 Stock-based compensation expense - - - 2,702,031 - 2,702,031 - 2,702,031 Net loss - - - - ( 11,511,505 ) ( 11,511,505 ) - ( 11,511,505 ) Net loss attributable to non-controlling interest - - - - 595,000 595,000 ( 595,000 ) - Balance, March 31, 2025 - 8,760,649 8,761 282,705,620 ( 222,054,969 ) 60,659,412 2,916,380 63,575,792 Issuance of common stock, net of costs of $ 177,420 - 2,185,249 2,185 3,292,261 - 3,294,446 - 3,294,446 Issuance of common stock and pre-funded warrants in April 2025 registered direct offering, net of costs of $ 256,116 - 465,000 465 1,743,292 - 1,743,757 - 1,743,757 Issuance of common stock and pre-funded warrants in June 2025 registered direct offering, net of costs of $ 571,126 - 540,000 540 5,430,296 - 5,430,836 - 5,430,836 Issuance of common stock upon exercise of pre-funded warrants - 2,524,131 2,524 ( 2,227 ) - 297 - 297 Sale of Series A preferred stock 100 - - 100 - 100 - 100 Redemption of Series A preferred stock ( 100 ) - - ( 100 ) - ( 100 ) - ( 100 ) Stock-based compensation expense - - - 2,719,674 - 2,719,674 - 2,719,674 Net loss - - - - ( 9,203,872 ) ( 9,203,872 ) - ( 9,203,872 ) Net loss attributable to non-controlling interest - - - - 414,000 414,000 ( 414,000 ) - Balance, June 30, 2025 $ - 14,475,029 $ 14,475 $ 295,888,916 $ ( 230,844,841 ) $ 65,058,550 $ 2,502,380 $ 67,560,930 Balance, September 30, 2023 $ - 6,354,371 $ 6,354 $ 253,056,133 $ ( 162,231,379 ) $ 90,831,108 $ 600,380 $ 91,431,488 Issuance of common stock for services - 4,351 4 76,142 - 76,146 - 76,146 Stock-based compensation expense - - - 3,058,185 - 3,058,185 - 3,058,185 Net loss - - - - ( 9,231,185 ) ( 9,231,185 ) - ( 9,231,185 ) Balance, December 31, 2023 - 6,358,722 6,358 256,190,460 ( 171,462,564 ) 84,734,254 600,380 85,334,634 Issuance of common stock for services - 5,069 6 98,073 - 98,079 - 98,079 Stock-based compensation expense - - - 3,078,392 - 3,078,392 - 3,078,392 Net loss - - - - ( 8,544,154 ) ( 8,544,154 ) - ( 8,544,154 ) Balance, March 31, 2024 - 6,363,791 6,364 259,366,925 ( 180,006,718 ) 79,366,571 600,380 79,966,951 Issuance of common stock for services - 6,000 6 109,944 - 109,950 - 109,950 Issuance of common stock in registered direct offering, net of costs of $ 1,281,051 - 857,143 857 13,718,094 - 13,718,951 - 13,718,951 Issuance of common stock upon cashless exercise of stock options - 2,082 2 ( 2 ) - - - - Stock-based compensation expense - - - 3,061,763 - 3,061,763 - 3,061,763 Net loss - - - - ( 10,573,336 ) ( 10,573,336 ) - ( 10,573,336 ) Balance, June 30, 2024 $ - 7,229,016 $ 7,229 $ 276,256,724 $ ( 190,580,054 ) $ 85,683,899 $ 600,380 $ 86,284,279 See notes to unaudited condensed consolidated financial statements. Reflects a 1-for-25 reverse stock split effective November 25, 2024. 3 CITIUS PHARMACEUTICALS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED JUNE 30, 2025 AND 2024 (Unaudited) 2025 2024 Cash Flows From Operating Activities: Net loss $ ( 30,996,623 ) $ ( 28,348,675 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation expense 7,946,529 9,198,340 Issuance of common stock for services — 284,175 Amortization of operating lease right-of-use asset 152,212 154,494 Depreciation — 1,432 Deferred income tax expense 792,720 432,000 Changes in operating assets and liabilities: Inventory ( 8,940,201 ) — Prepaid expenses 1,386,824 ( 2,205,091 ) Accounts payable 5,166,831 ( 1,263,998 ) Accrued expenses 8,506,648 74,185 Accrued compensation 1,481,023 ( 454,315 ) Operating lease liability ( 167,911 ) ( 161,234 ) Net Cash Used In Operating Activities ( 14,671,948 ) ( 22,288,687 ) Cash Flows From Financing Activities: Net proceeds from common stock offerings 16,509,194 13,718,951 Proceeds from sale of Series A preferred stock 100 — Redemption of Series A preferred stock ( 100 ) — Proceeds from note payable and advance from employee 1,300,000 — Repayment of advance from employee ( 300,000 ) — Net Cash Provided By Financing Activities 17,509,194 13,718,951 Net Change in Cash and Cash Equivalents 2,837,246 ( 8,569,736 ) Cash and Cash Equivalents - Beginning of Period 3,251,880 26,480,928 Cash and Cash Equivalents - End of Period $ 6,089,126 $ 17,911,192 Supplemental Disclosures of Cash Flow Information and Non-cash Transactions: Operating lease right-of-use asset and liability recorded $ 786,697 $ — See notes to unaudited condensed consolidated financial statements. 4 CITIUS PHARMACEUTICALS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED JUNE 30, 2025 AND 2024 (Unaudited) 1. NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business Citius Pharmaceuticals, Inc. (“Citius Pharma,” and together with its subsidiaries, the “Company”, “we” or “us”) is a late-stage biopharmaceutical company dedicated to the development and commercialization of first-in-class critical care products with a focus on oncology, anti-infectives in adjunct cancer care, unique prescription products and stem cell therapies. On March 30, 2016, Citius Pharma acquired Leonard-Meron Biosciences, Inc. (“LMB”) as a wholly-owned subsidiary. We acquired all the outstanding stock of LMB by issuing shares of our common stock. The net assets acquired included identifiable intangible assets of $ 19,400,000 related to in-process research and development. We recorded goodwill of $ 9,346,796 for the excess of the purchase price over the net assets acquired. On September 11, 2020, we formed NoveCite, Inc. (“NoveCite”), a Delaware corporation, of which we own 75 % of the issued and outstanding capital stock (see Note 3). On August 23, 2021, we formed Citius Oncology, Inc. (formerly named Citius Acquisition Corp.) (“Citius Oncology”), as a wholly-owned subsidiary in conjunction with the acquisition of LYMPHIR, which began operations in April 2022. Pursuant to a merger agreement, dated October 23, 2023, with TenX Keane Acquisition, and its wholly owned subsidiary, TenX Merger Sub Inc (“Merger Sub”), on August 12, 2024, Merger Sub merged with and into Citius Oncology, with Citius Oncology surviving as a wholly owned subsidiary of TenX Keane Acquisition. After the merger and recapitalization (the “Merger”), the newly combined publicly traded company is owned 92.3 % by Citius Pharma, and is named “Citius Oncology, Inc.” (Nasdaq: CTOR). Since our inception, we have devoted substantially all our efforts to business planning, research and development, recruiting management and technical staff, and raising capital. 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, regulatory approval and market acceptance of its products, 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. Basis of Presentation and Summary of Significant Accounting Policies Basis of Preparation - The accompanying unaudited condensed consolidated financial statements include the operations of Citius Pharmaceuticals, Inc., its wholly-owned subsidiary LMB and its majority-owned subsidiaries NoveCite and Citius Oncology. On August 12, 2024, Citius Oncology, previously a wholly-owned subsidiary, became a 92.3 % majority- owned subsidiary. The operations of NoveCite and Citius Oncology are included in the consolidated results. The portion of equity that is not attributable to the Company, is presented as a non-controlling interest within stockholders’ equity. Unless excluded by shareholder agreements, the portion of net loss attributable to non-controlling interests is included in the statement of operations. 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 June 30, 2025, and the results of its operations and cash flows for the three and nine months ended June 30, 2025 and 2024. The operating results for the three and nine months ended June 30, 2025 are not necessarily indicative of the results that may be expected for the year ending September 30, 2025. 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, 2024 filed with the Securities and Exchange Commission (“SEC”) on December 27, 2024, as amended on January 27, 2025. 5 Use of Estimates - The process of preparing financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates having relatively higher significance include the accounting for in-process research and development, goodwill, stock-based compensation 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. 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 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 experienced negative cash flows from operations of $ 14,671,948 for the nine months ended June 30, 2025. The Company had a negative working capital of approximately $ 27.2 million at June 30, 2025. The Company estimates that its available cash resources will be sufficient to fund its operations through September 2025 which raises substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the accompanying consolidated financial statements are issued. The Company is currently engaged in capital raising initiatives, as well as separate capital raising initiatives through its 84.3 % owned subsidiary Citius Oncology in an effort to extend its cash runway. Citius Oncology also has retained Jefferies LLC as its exclusive financial advisor in evaluating strategic alternatives aimed at maximizing shareholder value. 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. However, the Company’s continued operations beyond September 2025, including its development plans for Mino-Lok, Halo-Lido and NoveCite, will depend on its ability to obtain regulatory approval for Mino-Lok and generate substantial revenue from the sale of LYMPHIR 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 LYMPHIR 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 LYMPHIR, 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. The accompanying financial statements do not include any adjustments that might result from the outcome of the above uncertainty. 3. PATENT AND TECHNOLOGY LICENSE AGREEMENTS Patent and Technology License Agreement – 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. LMB pays an annual maintenance fee each June until commercial sales of a product subject to the license commence. The Company recorded an annual maintenance fee expense of $ 90,000 in both 2025 and 2024. 6 LMB will also pay annual royalties on net sales of licensed products, with a low double digit royalty rate (within a range of 10 % to 15 %). 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- to mid-single digits (within a range of 2 % to 7 %). After a commercial sale is obtained, LMB must pay minimum aggregate annual royalties of $ 100,000 in the first commercial year which is prorated for a less than 12-month period, increasing $ 25,000 per year to a maximum of $ 150,000 annually. 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. Unless earlier terminated by NAT, based on the failure to achieve certain development and commercial milestones, the license agreement remains in effect until the date that all patents licensed under the agreement have expired and all patent applications within the licensed patent rights have been cancelled, withdrawn, or expressly abandoned. License Agreement with Eterna On October 6, 2020, our subsidiary, NoveCite, entered into a license agreement with Novellus Therapeutics Limited (“Novellus”), whereby NoveCite acquired an exclusive, worldwide license, with the right to sublicense, develop and commercialize a stem cell therapy based on the Novellus’s patented technology for the treatment of acute pneumonitis of any etiology in which inflammation is a major agent in humans. Upon execution of the license agreement, we, through NoveCite, paid an upfront payment of $ 5,000,000 to Novellus, which was charged to research and development expense during the year ended September 30, 2021, and issued to Novellus shares of NoveCite’s common stock representing 25 % of the outstanding equity. We own the other 75 % of NoveCite’s outstanding equity. Pursuant to the terms of the original stock subscription agreement, if NoveCite issued additional equity, subject to certain exceptions, NoveCite had to maintain Novellus’s ownership at 25 % by issuing additional shares to Novellus. In July 2021, Novellus was acquired by Brooklyn ImmunoTherapeutics, Inc. (“Brooklyn”). Pursuant to this transaction, the NoveCite license was assumed by Brooklyn with all original terms and conditions. In connection with that transaction, the stock subscription agreement was amended to assign to Brooklyn all of Novellus’s right, title, and interest in the stock subscription agreement and delete the anti-dilution protection and replace it with a right of first refusal whereby Brooklyn will have the right to purchase all or a portion of the securities that NoveCite intends to sell or in the alternative, at the option of NoveCite, Brooklyn may purchase that amount of the securities proposed to be sold by NoveCite to allow Brooklyn to maintain its then percentage ownership. In October 2022, Brooklyn changed its name to Eterna Therapeutics Inc. (“Eterna”). Citius Pharma is responsible for the operational activities of NoveCite and bears all costs necessary to operate NoveCite. Citius Pharma’s officers are also the officers of NoveCite and oversee the business strategy and operations of NoveCite. As such, NoveCite is accounted for as a consolidated subsidiary with a noncontrolling interest. Eterna has no contractual rights in the profits or obligations to share in the losses of NoveCite, and the Company has not allocated any losses to the noncontrolling interest. Under the license agreement, NoveCite is obligated to pay Eterna up to an aggregate of $ 51,000,000 in regulatory and developmental milestone payments. NoveCite also must pay a royalty equal to a mid-teens percentage 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 a mid-single digit percentage (within a range of 4 % to 8 %) 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. The royalty will end on the earlier of (i) date on which a biosimilar product is first marketed, sold, or distributed by Eterna 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 Eterna 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 Eterna receives any revenue involving the original cell line included in the licensed technology, then Eterna shall remit to NoveCite 50 % of such revenue. The term of the license agreement continues on a country-by-country and licensed product-by-licensed product basis until the expiration of the last-to-expire royalty term. Either party may terminate the license agreement upon written notice if the other party is in material default. NoveCite may terminate the license agreement at any time without cause upon 90 days prior written notice. 7 Eterna 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 Eterna 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. 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. We renamed E7777 as I/ONTAK and also obtained the trade name of LYMPHIR for the product. Citius Pharma assigned these agreements to Citius Oncology effective April 1, 2022. The Company received a BLA approval from the FDA for LYMPHIR in August 2024. Under the terms of these agreements, Citius Pharma acquired Dr. Reddy’s exclusive license for E7777 from Eisai and other related assets owned by Dr. Reddy’s (which are now owned by Citius Oncology). The exclusive license rights, through Citius Oncology, include rights to develop and commercialize E7777 in all markets except for Japan and certain parts of Asia. Additionally, we, through Citius Oncology, retained an option on the right to develop and market the product in India. Eisai retains exclusive development and marketing rights for the agent in Japan, China, Korea, Taiwan, Hong Kong, Macau, Indonesia, Thailand, Malaysia, Brunei, Singapore, India (subject to the India option prior to FDA approval), 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 $ 22.5 million was due as of June 30, 2025. Pending further discussions with Dr. Reddy’s, Dr. Reddy’s agreed to a partial deferral without penalty of this milestone payment. On July 10, 2025, Citius Pharma made a payment of $ 1,000,000 to Dr. Reddy’s against the outstanding milestone approval fee. On July 28, 2025, Citius Oncology made a payment of $ 1,250,000 to Dr. Reddy’s against the outstanding milestone approval fees. Under the license agreement, Eisai was to receive a $ 5.9 million milestone payment upon FDA approval, which is included in license payable at June 30, 2025, and additional commercial milestone payments related to the achievement of net product sales thresholds and an aggregate of up to $ 22 million related to the achievement of net product sales thresholds. 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 Biologics License Application (“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. The BLA was approved by the FDA on August 8, 2024. We, through Citius Oncology, will be 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. Citius Oncology has agreed to pay Eisai on or before July 15, 2025, an aggregate amount of $ 2,535,318 and thereafter on the 15 th of each of the next four months to pay Eisai $ 2,350,000 and make a final payment of $ 2,197,892 to Eisai on or before December 15, 2025, in each case with interest on each obligation from its original due date through the date of actual payment under the letter agreement at the rate of 2 % per annum. During the nine months ended June 30, 2025, Citius Oncology recorded $ 160,755 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 the failure of Citius Oncology 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 July 15, 2025, Citius Pharma made a payment of $ 1,091,167.12 to Eisai for the outstanding milestone approval fee and accumulated interest associated with the letter agreement. On July 21, 2025, Citius Oncology made a payment to Eisai of $ 1,616,521.96 for other certain invoices and accumulated interest associated with the letter agreement. 8 The term of the license agreement will continue until (i) March 30, 2026, if there has not been a commercial sale of a licensed product in the territory, or (ii) if there has been a first commercial sale of a licensed product in the territory by March 30, 2026, the 10-year anniversary of the first commercial sale on a country-by-country basis. The term of the license may be extended for additional 10-year periods for all countries in the territory by notifying Eisai and paying an extension fee equal to $ 10 million. Either party may terminate the license agreement upon written notice if the other party is in material breach of the agreement, subject to cure within the designated time periods. Either party also may terminate the license agreement immediately upon written notice if the other party files for bankruptcy or takes related actions or is unable to pay its debts as they become due. Additionally, either party will have the right to terminate the agreement if the other party directly or indirectly challenges the patentability, enforceability or validity of any licensed patent. Under the asset 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. As part of the definitive agreement with Dr. Reddy’s, Citius Pharmaceuticals acquired method of use patents in which LYMPHIR is administered in combination with the programmed cell death protein 1 (“PD-1”) pathway inhibitor drug class. PD-1 plays a vital role in inhibiting immune responses and promoting self-tolerance through modulating the activity of T-cells, activating apoptosis of antigen-specific T cells and inhibiting apoptosis of regulatory T cells. The following patents were acquired and subsequently transferred to Citius Oncology, Inc.: ● US Provisional Application No. 63/070,645, which was filed on August 26, 2020, and subsequently published as US 2022/0062390 A1 on March 3, 2022, entitled Methods of Treating Cancer. ● International Patent Application Number: PCT/IB2021/0576733, which was filed with the World Intellectual Property Organization on August 23, 2021, and subsequently published as WO 2022/043863 A1 on March 3, 2022, entitled, Combination for Use in Methods of Treating Cancer. Upon FDA approval of LYMPHIR in August 2024, Citius Oncology was subject to approval milestone payments totaling $ 33.4 million. The $ 33.4 million was recorded as in-process research and development asset and will be subject to amortization over the regulatory exclusivity period commencing upon revenue generation. 4. INVENTORY Inventory is stated at the lower of actual accumulated costs or net realizable value. Inventory consists of finished goods of $ 8,962,493 , and work in process of $ 8,246,474 as of June 30, 2025. Inventory consists of finished goods of $ 6,134,895 , and work in process of $ 2,133,862 as of September 30, 2024. Inventory is all related to the manufacturing of LYMPHIR commercial products expected to be sold commencing in the fourth quarter of 2025. No reserves against inventory were deemed necessary based on an evaluation of the product expiration dating. 5. PREPAID EXPENSES Prepaid expenses at June 30, 2025 consists of $ 84,756 of prepaid insurance, $ 128,420 in prepaid annual service fees for manufacturing support and $ 1,100,000 of advance payments, made for the preparation of long-lead time drug substance and product costs which will be utilized in research and development activities or in the manufacturing of LYMPHIR for sale. Prepaid expenses at September 30, 2024 consists of $ 2,700,000 of advance payments, made for the preparation of long-lead time drug substance and product costs which will be utilized in research and development activities or in the manufacturing of LYMPHIR for sale. 9 6. NOTE PAYABLE AND ADVANCE FROM EMPLOYEE On June 2, 2025, The Company borrowed $ 1,000,000 from an unrelated lender. The note payable is due in full on December 2, 2025 with interest at 15 % compounded monthly. Leonard Mazur (Chairman and Chief Executive Officer of the Company) personally guaranteed repayment of the note. Interest expense for the three and nine months ended June 30, 2025 was $ 11,507 . On May 28, 2025, an employee provided a $ 300,000 non-interest-bearing advance to the Company. On June 5, 2025, the Company repaid the employee in full. 7. COMMON STOCK, STOCK OPTIONS AND WARRANTS Authorized Common Stock and Reverse Stock Split The Company filed a Certificate of Change with the Secretary of State of the State of Nevada to (i) effect a 1-for-25 reverse stock split of the Company’s issued and outstanding shares of common stock, and (ii) decrease the number of total authorized shares of common stock from 400,000,000 shares to 16,000,000 shares. The reverse stock split was intended for the Company to regain compliance with the minimum bid price requirement of $ 1.00 per share of common stock for continued listing on the Nasdaq Capital Market. The reverse stock split became effective on November 25, 2024, and the Company’s Common Stock began trading on a reverse stock split-adjusted basis on the Nasdaq Capital Market on November 26, 2024. All share amounts have been retroactively adjusted to reflect the split. Series A Preferred Stock and Authorized Common Stock On April 17, 2025, the Company entered into an agreement with Leonard Mazur (Chairman and Chief Executive Officer of the Company), pursuant to which the Company sold one share of Series A Preferred Stock, par value $ 0.001 per share for $ 100 to Mr. Mazur. The Series A Preferred Stock was sold in connection with the June 9, 2025 special meeting of the stockholders for the purpose of approving an amendment to the Company’s Articles of Incorporation, as amended, to increase the number of shares of the Company’s authorized common stock from 16,000,000 to 250,000,000 . The Company’s stockholders approved the authorized share increase on June 9, 2025. On April 17, 2025, the Company filed a certificate of designation with the Nevada Secretary of State, designating the powers, rights, privileges and restrictions of the Series A Preferred Stock. The certificate provides that each share of Series A Preferred Stock will have 1,000,000,000 votes and will vote together with the outstanding shares of Common Stock as a single class, exclusively with respect to the authorized share increase proposal and shall not be entitled to vote on any other matter. The Series A Preferred Stock will be voted on the authorized share increase in the same proportion as the aggregate votes cast by holders of common stock “for” and “against” the proposal. The Series A Preferred Stock otherwise has no other voting rights, including in respect of any other proposal. The voting power attributable to the Series A Preferred Stock will be disregarded for purposes of determining whether a quorum is present at the special meeting, and the establishment of a quorum at the special meeting will be determined only with reference to the common stock. Pursuant to its terms, on June 9, 2025, the outstanding share of Series A Preferred Stock was redeemed automatically for $ 100 after the Company published the final results of the stockholder vote on the authorized stock increase. Common Stock Issued for Services On October 10, 2023, the Company issued 4,351 shares of common stock for media, and public and investor relations services and expensed the $ 76,146 fair value of the common stock issued. Common Stock Offerings On November 15, 2024 , the Company entered into an agreement with certain institutional investors for the issuance and sale, in a registered direct offering of 480,000 shares of common stock and warrants to purchase 480,000 shares of common stock. Gross proceeds were $ 3,000,000 and net proceeds were $ 2,574,051 after deducting fees and expenses. The shares and warrants were sold at a combined offering price of $ 6.25 . The immediately exercisable warrants have an exercise price of $ 6.25 per share and expire on November 19, 2029 . The estimated fair value of the warrants issued to the investors was approximately $ 1,575,000 . 10 The Company paid the placement agent 7 % of the gross proceeds and granted the placement agent immediately exercisable warrants to purchase 33,600 shares of common stock at an exercise price is $ 7.8125 per share which expire on November 15, 2029 . The estimated fair value of the warrants issued to the placement agent was approximately $ 104,000 . On January 7, 2025 , the Company entered into an agreement with certain institutional investors for the issuance and sale, in a registered direct offering of 743,496 shares of common stock and warrants to purchase 743,496 shares of common stock. Gross proceeds were approximately $ 3,000,000 and net proceeds were $ 2,657,167 after deducting fees and expenses. The shares and warrants were sold at a combined offering price of $ 4.035 . The immediately exercisable warrants have an exercise price of $ 3.91 per share and expire on January 8, 2030 . The estimated fair value of the warrants issued to the investors was approximately $ 2,091,000 . The Company paid the placement agent 7 % of the gross proceeds and granted the placement agent immediately exercisable warrants, to purchase 52,045 shares of common stock at $ 5.0438 per share which expire on January 7, 2030 . The estimated fair value of the warrants issued to the placement agent was approximately $ 138,000 . On April 1, 2025 , the Company sold 465,000 shares of common stock, and pre-funded warrants to purchase 1,274,131 shares of common stock at an offering price of $ 1.15 and $ 1.1499 . Gross proceeds were $ 1,999,873 and net proceeds were $ 1,743,757 after deducting fees and expenses. The immediately exercisable pre-funded warrants have an exercise price of $ 0.0001 per share and do not expire. All 1,274,131 of the pre-funded warrants were exercised during the three months ended June 30, 2025. The Company paid the placement agent 7 % of the gross proceeds and granted the placement agent warrants to purchase 121,739 shares of common stock at $ 1.4375 per share which are exercisable commencing on October 2, 2025 and expire on April 1, 2030. The estimated fair value of the warrants issued to the placement agent was approximately $ 100,000 . On June 11, 2025 , the Company sold 540,000 shares of common stock, and pre-funded warrants to purchase 4,380,000 shares of common stock at offering prices of $ 1.22 and $ 1.2199 , respectively, along with immediately exercisable two-year warrants to purchase 9,840,000 shares of common stock at $ 1.00 per share. On the expiration date, any warrants outstanding will be exercised via cashless exercise. Gross proceeds were $ 6,001,962 and net proceeds of the offering were $ 5,430,836 after deducting fees and expenses. The pre-funded warrants are exercisable immediately at $ 0.0001 per share and do not expire. A holder may not exercise, if they would beneficially own in excess of 4.99 % of the common stock; provided that upon 61 days’ notice, the holder may increase the beneficial ownership limitation to 9.99 %. 1,250,000 of the pre-funded warrants were exercised during the three months ended June 30, 2025. The estimated fair value of the 9,840,000 warrants issued to the investors was approximately $ 4,867,000 . The Company paid the placement agent a fee of $ 420,168 and other fees and expenses were $ 150,958 . In addition, the Company granted placement agent warrants to purchase 344,400 shares of common stock at an exercise price equal to $ 1.525 per share. The warrants are exercisable six months after issuance and expire after five years. On the expiration date, any warrants outstanding will be exercised via cashless exercise. The estimated fair value of the warrants issued to the placement agent was approximately $ 222,000 . At the Market Offering Agreement On August 12, 2024, the Company entered into a sales agreement, to sell, from time to time during the term of the agreement the Company’s common shares. During the three months ended March 31, 2025, the Company sold 289,910 shares for gross proceeds of $ 839,468 . Net proceeds after deducting broker fees and other offering expenses were $ 808,640 . During the three months ended June 30, 2025, the Company sold 2,185,249 shares for gross proceeds of $ 3,471,866 . Net proceeds after deducting broker fees and other offering expenses were $ 3,294,446 . Stock Option Plans Pursuant to our 2014 Stock Incentive Plan, we reserved 34,667 shares of common stock. As of June 30, 2025, there were options to purchase 16,910 shares outstanding, options to purchase 2,318 shares were exercised, options to purchase 15,439 shares expired or were forfeited, and no shares were available for future grants. 11 Pursuant to our 2018 Omnibus Stock Incentive Plan, we reserved 80,000 shares of common stock. As of June 30, 2025, there were options to purchase 67,200 shares outstanding, options to purchase 4,667 shares were exercised, options to purchase 3,733 shares expired or were forfeited, and the remaining 4,400 shares were transferred to the 2020 Omnibus Stock Incentive Plan (“2020 Plan”). Pursuant to our 2020 Plan, we reserved 124,400 shares of common stock. As of June 30, 2025, there were options to purchase 66,000 shares outstanding, options to purchase 8,800 shares expired or were forfeited and the remaining 49,600 shares were transferred to the 2021 Omnibus Stock Incentive Plan (“2021 Stock Plan”). Pursuant to our 2021 Stock Plan, we reserved 349,600 shares of common stock. As of June 30, 2025, options to purchase 330,000 shares were outstanding, options to purchase 18,200 shares expired or were forfeited and the remaining 1,400 shares were transferred to the 2023 Omnibus Stock Incentive Plan (“2023 Stock Plan”). In November 2022, our Board approved the 2023 Stock Plan, subject to stockholder approval, which was received on February 7, 2023. The 2023 Stock Plan reserved 481,400 shares of common stock for issuance. As of June 30, 2025, options to purchase 359,400 shares were outstanding, options to purchase 4,000 shares expired or were forfeited and 118,000 shares remain available for future grants. 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 our common stock. 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, 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 our stock option plans (excluding the NoveCite and Citius Oncology Stock Plans) is presented below: Option Shares Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at September 30, 2024 656,084 $ 36.41 7.26 years $ 0.00 Granted 185,000 9.50 Exercised - - Forfeited or expired ( 1,574 ) 242.80 Outstanding at June 30, 2025 839,510 $ 30.09 7.15 years $ 0.00 Exercisable at June 30, 2025 512,009 $ 39.73 6.13 years $ 0.00 On November 7, 2024, the Board of Directors granted options to purchase 158,000 shares to employees, 25,000 shares to directors and 2,000 shares to a consultant at $ 9.50 per share. The weighted average grant date fair value of the options granted during the nine months ended June 30, 2025 was estimated at $ 7.15 per share. These options vest over terms of 12 to 36 months and have a term of 10 years. At June 30, 2025, unrecognized total compensation cost related to unvested awards under the Citius Pharma stock plans of $ 2,077,242 is expected to be recognized over a weighted average period of 1.54 years. NoveCite Stock Plan - Under the NoveCite Stock Plan, adopted November 5, 2020, we reserved 2,000,000 common shares of NoveCite for issuance. 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 June 30, 2025, NoveCite has options outstanding to purchase 1,911,500 common shares of NoveCite, all of which are exercisable, and 88,500 shares available for future grants. All of the options were issued during the year ended September 30, 2021. These options vested 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 5.64 years and the weighted average exercise price is $ 0.24 per share. At June 30, 2025, there is no unrecognized compensation cost related to these awards. 12 Citius Oncology Stock Plan - Under the 2023 Citius Oncology Omnibus Stock Incentive Plan, adopted on April 29, 2023, Citius Oncology reserved 15,000,000 common shares of Citius Oncology for issuance. On August 2, 2024 Citius Oncology reserved an additional 15,000,000 common shares of Citius Oncology for issuance under the 2024 Citius Oncology Omnibus Stock Incentive Plan. The Citius Oncology 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. Volatility is estimated using the trading activity of Citius Pharmaceuticals common stock. until such time as Citius Oncology has 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 Citius Oncology stock plans is presented below: Shares Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at September 30, 2024 12,750,000 $ 2.15 8.78 years $ 0.00 Granted 5,750,000 1.07 Forfeited ( 333,333 ) 1.74 Outstanding at June 30, 2025 18,166,667 $ 1.82 8.43 years $ 46,051,667 Exercisable at June 30, 2025 5,554,167 $ 1.99 8.13 years $ 13,098,333 The weighted average grant date fair value of the Citius Oncology options granted during the nine months ended June 30, 2025 was estimated at $ 0.80 per share. All these options vest over terms of 12 to 36 months and have a term of 10 years. At June 30, 2025, unrecognized total compensation cost related to unvested awards under the Citius Oncology stock plans of $ 9,909,073 is expected to be recognized over a weighted average period of 1.41 years. Stock-based compensation expense for the three months ended June 30, 2025 and 2024 was $ 2,719,674 (including $ 2,125,237 for the Citius Oncology stock plans) and $ 3,061,763 (including $ 13,858 for the NoveCite plan and $ 1,957,000 for the Citius Oncology stock plans). Stock-based compensation expense for the nine months ended June 30, 2025 and 2024 was $ 7,946,529 (including $ 6,022,287 for the Citius Oncology stock plans) and $ 9,198,340 (including $ 47,574 for the NoveCite plan and $ 5,831,000 for the Citius Oncology stock plans). Warrants The Company has reserved 17,623,006 shares of common stock for the exercise of outstanding warrants. The following table summarizes the warrants outstanding at June 30, 2025: Exercise price Number Expiration Dates August 2018 Offering Investors $ 28.75 156,863 August 14, 2025 August 2018 Offering Agent 39.84 7,576 August 8, 2025 September 2019 Offering Investors 19.25 111,732 September 27, 2025 September 2019 Offering Underwriter 27.97 7,774 September 27, 2025 February 2020 Exercise Agreement Agent 31.88 5,555 August 19, 2025 May 2020 Offering Investors 25.00 66,824 November 18, 2025 August 2020 Underwriter 32.81 8,079 August 10, 2025 January 2021 Offering Investors 30.78 123,648 July 27, 2026 January 2021 Offering Agent 40.44 14,065 July 27, 2026 February 2021 Offering Investors 42.50 823,211 February 19, 2026 February 2021 Offering Agent 47.03 100,256 February 19, 2026 May 2023 Offering Investors 37.50 500,000 May 8, 2028 May 2023 Offering Agent 37.50 35,000 May 3, 2028 April 2024 Offering Investors 18.75 857,143 October 30, 2029 April 2024 Offering Agent 21.875 60,000 April 25, 2029 November 2024 Offering Investors 6.25 480,000 November 18, 2029 November 2024 Offering Agent 7.8125 33,600 November 15, 2029 January 2025 Offering Investors 3.91 743,496 January 8, 2030 January 2025 Offering Agent 5.0438 52,045 January 7, 2030 April 2025 Offering Agent 1.4375 121,739 April 1, 2030 June 2025 Offering Investor 0.0001 3,130,000 No Expiration June 2025 Offering Investor 1.000 9,840,000 June 11, 2027 June 2025 Offering Agent 1.525 344,400 June 11, 2027 17,623,006 13 On April 3, 2024, the Board of Directors approved a one-year extension for warrants to purchase 51,780 shares of common stock with an exercise price of $ 35.50 per share. The warrants were held by Leonard Mazur, Chief Executive Officer and Chairman of the Board of Directors, and Myron Holubiak, Executive Vice President and Director, and were originally issued in April 2019 in a registered direct offering of common stock. Additionally, 9,605 warrants with an exercise price of $ 48.28 per share issued in connection with the registered direct offering were extended by one-year. These warrants were held by the registered direct offering placement agent. We recorded a deemed dividend of $ 321,559 based on the excess of the fair value of the modified warrants over the fair value of the warrants before the modification, the effect of which was an increase in the net loss attributable to common shareholders in the statement of operations for the three and nine months ended June 30, 2024. At June 30, 2025, the weighted average remaining life of the outstanding warrants is 1.88 years, all warrants are exercisable except for the April 2025 Offering Agent warrants which become exercisable on October 2, 2025, and the aggregate intrinsic value of the warrants outstanding was $ 10,822,938 . Common Stock Reserved A summary of common stock reserved for future issuances by the Company excluding all subsidiaries as of June 30, 2025 is as follows: Stock plan options outstanding 839,510 Stock plan shares available for future grants 118,000 Warrants outstanding 17,623,006 Total 18,580,516 8. GAIN ON SALE OF NEW JERSEY NET OPERATING LOSSES The Company recognized a gain of $ 2,387,842 for the nine months ended June 30, 2024, 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. 9. COMMITMENTS AND CONTINGENCIES Operating Lease Effective July 1, 2019, Citius Pharma entered into a 76-month lease for office space in Cranford, NJ. On February 28, 2025, we extended the lease until February 28, 2030. A right-of-use asset of $ 786,697 was recognized as a non-cash asset addition on the lease amendment date. We pay our proportionate share of real estate taxes and operating expenses in excess of the base year expenses. 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 significant assumptions in recognizing its right-of-use assets and corresponding lease liabilities: ● As the Cranford lease does not provide an implicit rate, the Company estimated the incremental borrowing rate in calculating the present value of the lease payments. ● Since the Company elected to account for each lease component and its associated non-lease components as a single combined component, all contract consideration was allocated to the combined lease component. ● The expected lease terms include noncancelable lease periods. 14 The elements of lease expense are as follows: Lease cost Nine Months Ended June 30, 2025 Nine Months Ended June 30, 2024 Operating lease cost $ 189,641 $ 179,117 Variable lease cost 10,806 3,732 Total lease cost $ 200,447 $ 182,849 Other information Weighted-average remaining lease term - operating leases 4.7 Years 1.3 Years Weighted-average discount rate - operating leases 8.0 % 8.0 % Maturities of lease liabilities due under the Company’s non-cancellable leases are as follows: Year Ending September 30, June 30, 2025 2025 (excluding the 9 months ended June 30, 2025) $ 64,381 2026 192,740 2027 232,827 2028 237,686 2029 242,545 2030 102,849 Total lease payments 1,073,028 Less: interest ( 191,377 ) Present value of lease liabilities $ 881,651 Leases Classification June 30, 2025 September 30, 2024 Assets Lease asset Operating $ 880,732 $ 246,247 Total lease assets $ 880,732 $ 246,247 Liabilities Current Operating $ 114,694 $ 241,547 Non-current Operating 766,957   21,318 Total lease liabilities $ 881,651 $ 262,865 Interest expense on the lease liability was $ 21,590 and $ 24,623 for the nine months ended June 30, 2025 and 2024, respectively. Commercial Manufacturing Contracts The Company has entered into an agreement with a contract manufacturing organization for the manufacture and supply of drug substance. The agreement runs through calendar 2026, with an automatic renewal for a subsequent four-year term. Under this agreement, the Company is obligated to purchase minimum annual quantities of batches at a set price per batch, subject to annual increases. Additionally, the Company is required to pay an annual service fee of $ 250,000 . The agreement also includes provisions for potential price increases based on increases in the manufacturer’s operating expenses or industry indices, as well as significant termination fees and obligations. As of June 30, 2025, the total minimum purchase commitment under this agreement was approximately $ 18.3 million consisting of payments of $ 11.9 million and $ 5.4 million for calendar years 2025 and 2026, respectively, and $ 1.0 million for 2026 pass-throughs and consumable manufacturing components. 15 As of June 30, 2025, the Company also has commercial supply agreements with two other vendors for the completion and packaging of finished drug products. Minimum purchase commitments under these two agreements amount to approximately $ 4.5 million consisting of purchase commitment obligations of $ 2.9 million in calendar year 2025 and $ 1.6 million in 2026. 10. MERGER AGREEMENT On October 23, 2023, the Company and its then wholly owned subsidiary Citius Oncology 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 Citius Oncology, with Citius Oncology surviving as a wholly owned subsidiary of TenX (the “Merger”) which was subsequently renamed Citius Oncology Sub. 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). The Merger recapitalization resulted in a 92.3 % ownership interest by the Company in Citius Oncology. 11. SUBSEQUENT EVENTS Nasdaq Listing On July 8, 2025, we received formal notification that we had regained compliance with the $ 1.00 per share requirement for continued inclusion on the Nasdaq Stock Market LLC. From July 1, 2025 through August 9. 2025 and from the registered direct offering of June 11, 2025, 2,450,000 pre-funded warrants were exercised for the issuance of common stock. 16