What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-12-23 compared with 2024-12-27 · 323 added, 243 removed, 164 unchanged (78% of the section changed)

Management’s Discussion and Analysis

of Financial Condition and Results of Operations

Management’s Discussion and

Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our

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These forward-looking

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

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

Our actual results

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

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

date of this report.

Historical Background

We are a biopharmaceutical company dedicated to

the development and commercialization of first-in-class critical care products.

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

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

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

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

filing date of this report.

We are a biopharmaceutical company dedicated

to the development and commercialization of first-in-class critical care products.

On September 12, 2014, we acquired Citius Pharmaceuticals,

LLC as a wholly-owned subsidiary.

Citius Pharmaceuticals, LLC was dissolved on December 29, 2023.

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

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We acquired identifiable intangible assets of $19,400,000

related to in-process research and development and recorded goodwill of $9,346,796 for the excess of the purchase consideration over the

net assets acquired.

related to in-process research and development and recorded goodwill of $9,346,796 for the excess of the purchase consideration over

the net assets acquired.

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

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

of which we own 75% of the issued and outstanding capital stock.

On August 23, 2021, we formed Citius Acquisition

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In August 2024, as part of the merger, the new publicly-traded company and majority-owned

subsidiary of Citius Pharma was named Citius Oncology, Inc.

subsidiary was named Citius Oncology, Inc.

In-process research and development of $19,400,000

represents the 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.

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.

In-process research and development of $73,400,000 represents the value of our exclusive

license for LYMPHIR (denileukin diftitox), a late-stage oncology immunotherapy for the treatment of CTCL, a rare form of non-Hodgkin lymphoma

and is expected to be amortized on a straight-line basis over a period of twelve years commencing upon revenue generation within the first

half of 2025.

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

Goodwill of $9,346,796 represents the value of LMB’s industry relationships and its assembled workforce.

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

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

the value of our exclusive license for LYMPHIR (denileukin diftitox), a late-stage oncology immunotherapy for the treatment of CTCL,

a rare form of non-Hodgkin lymphoma and is expected to be amortized on a straight-line basis over a period of twelve years commencing

upon revenue generation in December 2025.

Through September 30, 2025, we have devoted substantially

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We have not yet realized any revenues from our operations.

Recent Developments

As previously disclosed, on October 23, 2023,

Citius Pharma and SpinCo entered into the Merger Agreement with TenX and Merger Sub, a wholly owned subsidiary of TenX.

On August 12,

2024, pursuant to the terms and conditions of the Merger Agreement, Merger Sub merged with and into SpinCo, with SpinCo surviving as a

wholly owned subsidiary of TenX.

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, TenX changed its name to “Citius Oncology, Inc.” (Nasdaq:

Immediately after the closing of the Merger,

Citius Pharma owned approximately 92.3% of the outstanding shares of common stock of Citius Oncology, Inc.

Reverse Stock Split

Effective November 25, 2024, the Company executed

a reverse stock split of its common stock, par value $0.001 per share, at a ratio of 1-for-25 (“Reverse Stock Split”).

amounts have been retroactively adjusted to reflect the split.

Effective November 25, 2024, we executed a reverse

stock split of our common stock, at a ratio of 1-for-25.

All share amounts have been retroactively adjusted to reflect the split.

Patent and Technology License Agreements

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

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

the low double digits.

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

to the low double digits.

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

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Upon execution of the license

agreement, NoveCite paid an upfront payment of $5,000,000 to Novellus and issued to Novellus shares of Novecite’s common stock representing

25% of NoveCite’s currently outstanding equity.

agreement, NoveCite paid $5,000,000 to Novellus and issued Novellus shares of Novecite’s common stock representing 25% of NoveCite’s

currently outstanding equity.

We own the other 75% of NoveCite’s currently outstanding equity.

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

This royalty is subject

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

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

The royalty will end

on the earlier of (i) date on which a biosimilar product is first marketed, sold, or distributed by Novellus 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 Novellus 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 Novellus receives any revenue involving the original cell line included in the licensed technology, then Novellus shall remit

to NoveCite 50% of such revenue.

LYMPHIR - In September 2021, the Company

entered into an asset purchase agreement with Dr.

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

E7777 (denileukin diftitox), a late-stage oncology immunotherapy for the treatment of CTCL, a rare form of non-Hodgkin lymphoma.

obtained the trade name of LYMPHIR for E7777.

Citius Pharma assigned these agreements to SpinCo effective April 1, 2022.

This royalty is

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

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

royalty will end on the earlier of (i) date on which a biosimilar product is first marketed, sold, or distributed by Novellus 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 Novellus 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 Novellus receives any revenue involving the original cell line included in the licensed technology, then Novellus shall

remit to NoveCite 50% of such revenue.

LYMPHIR – In September 2021, the

Company entered into an asset purchase agreement with Dr.

Reddy’s and a license agreement with Eisai to acquire an exclusive license

of E7777 (denileukin diftitox), an oncology immunotherapy for the treatment of CTCL, a rare form of non-Hodgkin lymphoma.

Citius Pharma

assigned these agreements to SpinCo effective April 1, 2022.

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

for the product.

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

and context that is being discussed.

Under the terms of these agreements, Citius Pharma

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

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

Reddy’s (which are now owned

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parts of Asia.

Additionally, we, through our subsidiary, retained an option on the right to develop and market the product in India.

retains exclusive development and marketing rights for the agent in Japan and Asia.

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

Indonesia, Thailand, Malaysia, Brunei, Singapore, India, Pakistan, Sri Lanka, Philippines, Vietnam, Myanmar, Cambodia, Laos, Afghanistan,

Bangladesh, Bhutan, Nepal, Mongolia, and Papua New Guinea.

Citius Pharma paid Dr.

Reddy’s a $40 million

upfront payment which represents the acquisition date fair value of the in-process research and development acquired from Dr.

Reddy’s 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 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.

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 under the terms of the asset purchase agreement for which a balance of $22.5 million remains

due as of September 30, 2024.

Pending further discussions with Dr.

Reddy’s agreed to a partial deferral without

penalty of this milestone payment.

Under the license agreement, Eisai is to receive

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

Reddy’s a $40 million upfront payment which represents

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

Reddy’s is entitled to up to $40 million

in development milestone payments related to CTCL approvals in the U.S.

and other markets, up to $70 million in development milestones

for additional indications, as well as commercial milestone payments and low double-digit tiered royalties on net product sales (within

a range of 10% to 15%), and up to $300 million for commercial sales milestones.

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.

Oncology will also pay Dr.

Reddy’s an amount equal to a low-thirties percentage of any sublicense upfront consideration or milestone

payments (or the like) received by us and the greater of (i) a low-thirties percentage of any sublicensee sales-based royalties or (ii)

a mid-single digit percentage of such licensee’s net sales.

Citius Pharma is a guarantor of 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 $19.75 million remains due as of September 30, 2025.

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

Under the license agreement, Eisai was due a

$5.9 million milestone payment, upon FDA approval, of which $2.9 million remains payable at September 30, 2025, and additional commercial

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

of net product sales thresholds.

The Company was also required to reimburse Eisai for up to $2.65 million of its costs to complete the

Citius Oncology was required to reimburse Eisai for up to $2.65 million of its costs to complete the

Phase 3 pivotal clinical trial for LYMPHIR for the CTCL indication and reimburse Eisai for all reasonable costs associated with the preparation

of a BLA for LYMPHIR.

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

LYMPHIR with the FDA.

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

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

for LYMPHIR with the FDA.

Citius Oncology is 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 agreed to pay Eisai on or before July 15, 2025, an aggregate amount of $2,535,318 and thereafter

on the 15 th of each of the next four months to pay Eisai $2.35 million and make a final payment of $2,197,892 to Eisai

on or before December 15, 2025, in each case with interest on each obligation from its original due date through the date of actual payment

under the letter agreement at the rate of 2% per annum.

During the year ended September 30, 2025, Citius Oncology recorded $218,032 in

interest expense under the agreement.

The parties released each other from any and all claims, losses, damages, costs and expenses that

arise from or related to our failure to pay the milestone payment or the other incurred costs under the license agreement except for

any claims arising out of a breach of the letter agreement.

All other terms of the license agreement remain in full force and effect.

During the year ended September 30, 2025 Citius Oncology paid $3 million of the development milestone and the balance of $2.9 million

is included in license fee payable at September 30, 2025.

On July 21, 2025, Citius Oncology made a payment to Eisai of $1,616,522 for

other invoices and accumulated interest associated with the letter agreement.

The term of the license

agreement will continue until (i) if there has not been a commercial sale of a licensed product in the territory, the 10-year anniversary

of the original license effective date, March 30, 2016, or (ii) if there has been a first commercial sale of a licensed product in the

territory within the 10-year anniversary of the original license effective date, the 10-year anniversary of the first commercial sale

on a country-by-country basis.

The term of the license may be extended for additional 10-year periods for all countries in the territory

by notifying Eisai and paying an extension fee equal to $10 million.

Either party may terminate the license agreement upon written notice

if the other party is in material breach of the agreement, subject to cure within the designated time periods.

Either party also may terminate

the license agreement immediately upon written notice if the other party files for bankruptcy or takes related actions or is unable to

pay its debts as they become due.

Additionally, either party will have the right to terminate the agreement if the other party directly

or indirectly challenges the patentability, enforceability or validity of any licensed patent.

Also under the purchase

agreement with Dr.

Reddy’s, we are required to (i) use commercially reasonable efforts to make commercially available products in

the CTCL indication, peripheral T-cell lymphoma indication and immuno-oncology indication, (ii) initiate two investigator initiated immuno-oncology

agreement will continue until (i) March 30, 2026, if there has not been a commercial sale of a licensed product in the territory, or

(ii) if there has been a commercial sale of a licensed product in the territory by March 30, 2026, the 10-year anniversary of the first

commercial sale on a country-by-country basis.

We expect the first commercial sale to occur in the first quarter of 2026.

the license may be extended for additional 10-year periods for all countries in the territory by notifying Eisai and paying an extension

fee equal to $10 million.

Either party may terminate the license agreement upon written notice if the other party is in material breach

of the agreement, subject to cure within the designated time periods.

Either party also may terminate the license agreement immediately

upon written notice if the other party files for bankruptcy or takes related actions or is unable to pay its debts as they become due.

Additionally, either party will have the right to terminate the agreement if the other party directly or indirectly challenges the patentability,

enforceability or validity of any licensed patent.

Under the purchase agreement

Reddy’s, we are required to (i) use commercially reasonable efforts to make commercially available products in the CTCL

indication, peripheral T-cell lymphoma indication and immuno-oncology indication, (ii) initiate two investigator initiated immuno-oncology

trials (both of which have been initiated), (iii) use commercially reasonable efforts to achieve each of the approval milestones, and

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approval for such product in each such jurisdiction;

Results of Operations for Year Ended September

30, 2024 compared to Year Ended September 30, 2023

the launch of LYMPHIR in December 2025 satisfied this requirement in the U.S.

Specialty Distribution

In 2025, the Company

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

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

RESULTS OF OPERATIONS

Year ended September 30, 2025 compared to

year ended September 30, 2024

September 30,

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(41,995,681 )

Interest income, net

Interest income

Interest expense

Gain on sale of New Jersey net operating losses

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$ (39,425,839 )

We did not generate any revenues for the years

ended September 30, 2024 and 2023.

We did not generate any revenues for the years ended September 30,

2025 or 2024.

Revenue commenced in December 2025.

Research and Development Expenses

For the year ended September 30, 2025, research

and development expenses were $11,906,601 as compared to $14,819,729 for the year ended September 30, 2023, a decrease of $2,913,128.

Research and development costs for Mino-Lok®

increased by $446,207 to $4,662,968 for the year ended September 30, 2024 as compared to $4,216,761 for the year ended September 30, 2023,

driven primarily by shutdown costs associated with the end of the Phase 3 trial for Mino-Lok.

Research and development costs for our Halo-Lido

product candidate decreased by $3,538,640 to $507,774 for the year ended September 30, 2024 as compared to $4,046,414 for the year ended

September 30, 2023 due to completion of the Phase 2 study in April 2023.

Citius subsequently met with the FDA at an end of Phase

2 meeting to discuss next steps in the clinical development program.

During the year ended September 30, 2024, research

and development costs for our proposed novel cellular therapy for acute respiratory distress syndrome (ARDS) were $19,120 as compared

to $199,172 for the year ended September 30, 2023.

The decrease of $180,607 was primarily related to lower manufacturing costs in the

year ended September 30, 2023.

During the year ended September 30, 2024, research

and development expenses for our LYMPHIR product candidate were $5,118,977 as compared to $6,081,385 during the year ended September 30,

The decrease of $962,408 was primarily due to development activities completed for the resubmission of the BLA of LYMPHIR in January

2024 which were associated with CRL remediation.

and development expenses were $9,156,474 as compared to $11,906,601 during the year ended September 30, 2024, a decrease of $2,750,127.

Research and development costs for LYMPHIR were

$8,328,588 during the year ended September 30, 2025 as compared to $5,118,977 for the year ended September 30, 2024.

The $3,209,611 increase

in expenses was primarily due to costs associated with the expense of a drug substance batch needed for the pre-license inspection of

the manufacturer.

Research and development costs for Mino-Lok decreased

by $3,863,984 to $798,984 for the year ended September 30, 2025 as compared to $4,662,968 for the year ended September 30, 2024, due

primarily to decreased costs since the completion of the Phase 3 trial and subsequent shutdown costs.

In November 2024, the Company held

a Type C meeting with the FDA to discuss the results of the Phase 3 study and to obtain the FDA’s view on development plans for

The FDA provided clear, constructive, and actionable guidance during the discussion, underscoring a pathway to support a future

an NDA submission for Mino-Lok.

Research and development costs for Halo-Lido

decreased by $493,084 to $14,690 for the year ended September 30, 2025 as compared to $507,774 for the year ended September 30, 2024

due to lower costs since the completion of the Phase 2 study in April 2023.

Citius subsequently met with the FDA for an end of Phase

2 meeting to discuss the next steps in the clinical development program.

We expect that research and development expenses

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For the year ended September 30, 2025, general

and administrative expenses were $18,249,402 as compared to $15,295,584 for the year ended September 30, 2023, an increase of $2,953,818.

The primary reason for the increase was costs associated with pre-launch and market research activities associated with LYMPHIR.

and administrative expenses consist primarily of compensation costs, professional fees for legal, regulatory, accounting and corporate

development services, and investor relations expenses.

and administrative expenses were $18,532,843 as compared to $18,249,402 for the year ended September 30, 2024.

General and administrative

expenses increased by $283,441 in comparison with the prior period.

The primary reason for the increase were higher costs for pre-launch

commercial activities associated with LYMPHIR.

General and administrative expenses consist primarily of compensation costs, professional

fees for legal, regulatory, accounting, and corporate development services, and investor relations expenses.

Stock-based Compensation Expense

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Stock-based compensation expense

includes options granted to directors, employees, and consultants.

The primary reason for the $5,222,973 increase in stock-based compensation

expenses is associated with the Citius Oncology stock plan.

Stock based compensation expense under the Citius Oncology stock plan was

$7,498,817 during the year ended September 30, 2024, vs $1,965,500 for the year ended September 30.

2023 as the plan was initiated in

For the years ended September 30, 2024 and 2023, stock-based compensation expense also includes $47,547 and $130,382, respectively,

for the NoveCite stock option plan.

In fiscal year 2023, we granted options to our new employees and additional options to other employees,

our directors, and consultants.

During the year ended September 30, 2024, the

Company earned $758,000 of net interest income compared to $1,179,417 of interest income during the year ended September 30, 2023.

decrease of $421,417 was due to lower average cash balances over the course of 2024 vs.

includes $2,515,872 for stock options under the Citius Pharma stock plans, $8,116,678 for stock options and $203,741 for restricted stock

awards under the Citius Oncology stock plans for the year ended September 30, 2025.

Stock-based compensation expense includes $4,293,287

for stock options under the Citius Pharma stock plans, $7,498,817 for stock options under the Citius Oncology stock plans, and $47,574

for stock options under the NoveCite Stock plan for the year ended September 30, 2024.

Stock-based compensation expense for the year

ended September 30, 2025 decreased by $1,003,387 in comparison to the prior period primarily due to lower costs for the Citius Pharma

Other Income (Expense)

Interest income for the year ended September

30, 2025 was $110,081 as compared to interest income of $758,000 for the prior period.

The decrease is due to lower average investable

balances of the remaining proceeds of our equity offerings in money market accounts.

Interest expense of $267,782 for the year ended

September 30, 2025 consists of $218,032 in interest expense under the payment agreement with Eisai and $49,750 in interest expense on

the note payable.

Other income for the year ended September 30,

2024 also includes the $2,387,842 gain recognized 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.

2024 included a gain of $2,387,842 recognized 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.

The Company recorded deferred income tax expense

of $576,000 in each of the years ended September 30, 2024 and 2023 related to the amortization for taxable purposes of its in-process

research and development asset.

of $1,056,960 and $576,000 for the years ended September 30, 2025 and 2024, respectively.

Deferred income tax expense is related to the

amortization for taxable purposes of our in-process research and development asset.

For the year ended September 30, 2025, we incurred

a net loss of $39,425,839 compared to a net loss of $32,542,912 for the year ended September 30, 2023.

a net loss of $39,740,269, compared to a net loss for the year ended September 30, 2024 of $39,425,839.

The $314,430 increase in the

net loss was primarily due to the decrease in other income of $1,619,264 and an increase in our operating expenses of $5,263,663.

expense increased due to increases in stock-based compensation and general and administrative expenses, which were offset by decreased

research and development expense.

net loss was primarily due to the increase of $283,441 in general and administrative expenses, the decrease in other income (expense)

of $3,303,543 partially offset by lower research and development expense of $2,750,127 and lower stock-based compensation expense of

LIQUIDITY AND CAPITAL RESOURCES

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($16,980,000) at September 30, 2025.

At September 30, 2024, Citius Pharma had cash and cash equivalents of $3,251,880 available to fund

its operations.

At September 30, 2025, Citius Pharma had cash and cash equivalents of approximately $4,252,000 available

to fund its operations.

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

During the year ended

September 30, 2024, the Company received net proceeds of $13,803,684 from the issuance of equity.

Our primary uses of operating cash were

for in-licensing of intellectual property, product development and commercialization activities, employee compensation, consulting fees,

legal and accounting fees, insurance, and investor relations expenses.

We expect that we will have sufficient funds to

continue our operations through February 2025.

During the years ended September 30, 2025 and

2024, the Company received net proceeds of $32,329,748 and $13,803,684, respectively from the issuance of equity.

Our primary uses of operating cash were for in-licensing

of intellectual property, product development and commercialization activities, employee compensation, consulting fees, legal and accounting

fees, insurance, and investor relations expenses.

After giving effect to a $6.0 million capital

raise by us in October 2025 and an $18.0 million capital raise by Citius Oncology in December 2025, we expect that we will have sufficient

funds to continue our operations through March 2026.

Financing Activities

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million in non-dilutive capital through the New Jersey Economic Development Authority in March 2024.

On April 30, 2024, the Company closed a registered

direct offering of 857,143 common shares and warrants to purchase up to 857,143 common shares, at a purchase price of $17.50 per share

and accompanying warrant for gross proceeds of $15,000,002.

The warrants have an exercise price of $18.75 per share, are exercisable six

months from the date of issuance, and expire on October 30, 2029.

The estimated fair value of the warrants issued to the investors was

approximately $11,206,000.

On April 30, 2024, Citius Pharma sold 857,143

shares of common stock and warrants to purchase 857,143 shares, at $17.50 per share and accompanying warrant for gross proceeds of $15,000,002.

The warrants have an exercise price of $18.75 per share, are exercisable six months after issuance, and expire on October 30, 2029.

During the year ended September 30, 2024, Citius

Pharma sold 18,168 shares for gross proceeds of $252,140 under its at the market offering agreement.

On November 15, 2024, Citius Pharma sold 480,000

shares of common stock and warrants to purchase 480,000 shares at $6.25 per share for gross proceeds of $3,000,000.

The immediately

exercisable warrants have an exercise price of $6.25 per share and expire on November 19, 2029.

On January 7, 2025, Citius Pharma sold 743,496

shares of common stock and warrants to purchase 743,496 shares at $4.035 per share for gross proceeds of $3,000,000.

The immediately

exercisable warrants have an exercise price of $3.91 per share and expire on January 8, 2030.

On April 1, 2025, Citius Pharma sold 465,000

shares of common stock, and pre-funded warrants to purchase 1,274,131 shares at offering prices of $1.15 per share and $1.1499 per pre-funded

warrant for gross proceeds of $1,999,873.

The immediately exercisable pre-funded warrants have an exercise price of $0.0001 per

share and do not expire.

All of the pre-funded warrants were exercised during the year ended September 30, 2025.

On June 11, 2025, Citius Pharma sold 540,000

shares of common stock at $1.22 per share, sold pre-funded warrants to purchase 4,380,000 shares at $1.2199 per share, and issued immediately

exercisable two-year warrants to purchase 9,840,000 shares at $1.00 per share.

for gross proceeds of $6,001,962.

The pre-funded

warrants are exercisable immediately at $0.0001 per share and do not expire.

During the year ended September 30, 2025 all of the pre-funded

warrants were exercised.

On July 17, 2025, Citius Oncology sold 6,818,182

shares of common stock and warrants to purchase 6,818,182 shares at a unit price of $1.32 for gross proceeds of $9,000,000.

The immediately

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

On September 10, 2025, Citius Oncology sold 5,142,858

shares of common stock and warrants to purchase 5,142,858 shares at a unit price of $1.75 for gross proceeds of $9,000,000.

are exercisable at $1.84 per share beginning on March 10, 2026 and expire on March 10, 2031.

During the year ended September 30, 2025, Citius

Pharma sold 2,917,874 shares for gross proceeds of $4,968,618 under its at-the-market offering facility.

On October 21, 2025, Citius Pharma sold 3,973,510

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

at a combined per unit price of $1.51 per share for gross proceeds of $6,000,000.

The immediately exercisable five-year warrants have

an exercise price of $1.40 per share.

We need to obtain substantial additional financing

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

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

to us, or at all.

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

On March 28, 2025, we entered

into a letter agreement to pay Eisai on or before July 15, 2025, $2,535,318 and thereafter on the 15 th of each of

the next four months $2,350,000 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 at the rate of 2% per annum.

As of September 30, 2025, we owe a balance of

$2,900,000 for the milestone approval fee and $6,697,892 for certain other invoices.

At the time of the FDA

approval for LYMPHIR, a $27.5 million milestone payment became payable to Dr.

Reddy’s of which a balance of $19.75 million

remains due as of September 30, 2025.

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

We entered into an agreement

with a contract manufacturing organization for the manufacture and supply of drug substance.

Under this agreement, we are obligated

to purchase minimum annual quantities of batches at a set price per batch, subject to annual increases.

As of September 30, 2025,

the total minimum purchase commitment under this agreement was approximately $16.2 million, consisting of payments of $8.5 million

and $5.3 million for calendar years 2025 and 2026, respectively and $2.4 million for 2026 pass-throughs and consumable manufacturing

As of September 30, 2025,

the Company also has commercial supply agreements with two other vendors for the completion and packaging of finished drug products.

Minimum purchase commitments under these two agreements are approximately $4.9 million consisting of purchase commitment obligations

of $1.2 million in calendar years 2025 and $1.9 million in 2026 and $1.8 million in 2027.

Based on our cash and cash equivalents at September

30, 2024, we expect that we will have sufficient funds to continue our operations through February 2025.

We expect to raise additional

capital in the future to support our operations beyond February 2025.

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

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

30, 2025 and our October 21, 2025 equity sale and the December 2025 equity sale by Citius Oncology, we expect that we will have sufficient

funds to continue our operations through March 2026.

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

beyond March 2026.

There is no assurance, however, that we will be successful in raising the needed capital or that the proceeds will

be received in an amount or in a timely manner to support our operations.

Our management believes that inflation has not

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CRITICAL ACCOUNTING POLICIES

Our discussion and analysis of our financial condition

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

accepted in the United States.

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

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

We review our estimates

on an ongoing basis.

We base our estimates on historical experience and on various other factors that we believe to be reasonable under

the circumstances.

Our discussion and analysis of our financial

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

generally accepted in the United States.

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

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

our estimates on an ongoing basis.

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

reasonable under the circumstances.

Actual results may differ from these estimates.

We believe the judgments and estimates required by the following accounting

policies to be critical in the preparation of our financial statements.

We believe the judgments and estimates required by

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

In-process Research and Development

The Company reviews intangible assets annually

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

remaining useful life of any intangible asset.

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

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

No impairments have occurred since the acquisitions

of our intangible assets through September 30, 2024.

The Company capitalizes intangible assets purchased from others for

use in research and development activities as In Process Research & Development (IPR&D) when the assets acquired have an alternative

future use, the Company anticipates future economic benefit from that use and the assets acquired are not dependent on future development.

Milestone payments upon regulatory approval that meet the same criteria are capitalized when the payments are considered recoverable based

on expected future cash flows.

Amortization of IPR&D over the exclusive regulatory period of the acquired asset commences upon revenue

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

the remaining useful life of any intangible asset.

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

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

No impairments have occurred since

the acquisitions of our intangible assets through September 30, 2025.

The Company capitalizes intangible assets purchased

from others for use in research and development activities as In Process Research & Development (IPR&D) when the assets acquired

have an alternative future use, the Company anticipates future economic benefit from that use and the assets acquired are not dependent

on future development.

Milestone payments upon regulatory approval that meet the same criteria are capitalized when the payments are

considered recoverable based on expected future cash flows.

Amortization of IPR&D over the exclusive regulatory period of the acquired

asset commences upon revenue generation.

In-process research and development includes

representing the value of LMB’s drug candidate, Mino-Lok, an antibiotic lock solution in Phase 3 clinical development, which if

approved, would be 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.

In-process research and development also includes $73,400,000 representing

the value of Citius Oncology’s exclusive license for LYMPHIR (denileukin diftitox), a late-stage oncology immunotherapy for the

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

$19,400,000 representing the value of LMB’s drug candidate, Mino-Lok, an antibiotic lock solution in Phase 3 clinical development,

which if approved, would be 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.

In-process research and development also includes $73,400,000

representing the value of Citius Oncology’s exclusive license for LYMPHIR (denileukin diftitox), an oncology immunotherapy for

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

12 years commencing upon revenue generation.

Citius Oncology’s In-process research and development consists of $40,000,000 paid to

Citius Oncology’s In-process research and development consists of $40,000,000 paid

Reddy’s from the asset purchase agreement and approval milestone fees of $27,500,000 to Dr.

Reddy’s and $5,900,000 to

Reddy’s and $5,900,000

Incremental costs incurred on IPR&D after

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

The Company reviews intangible assets annually

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

remaining useful life of any intangible asset.

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

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

No impairments have occurred since the acquisitions

of our intangible assets through September 30, 2024.

Goodwill represents the value of LMB’s industry

relationships and its assembled workforce.

Goodwill represents the value of LMB’s

industry relationships and its assembled workforce.

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

The Company evaluates the recoverability of goodwill

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

with Accounting Standard Update (“ASU”) 2017-04, Intangibles – Goodwill and Other (Topic 350):

Simplifying the Accounting

for Goodwill Impairment .

Goodwill is first qualitatively assessed to determine whether further impairment testing is necessary.

that management considers in this assessment include macroeconomic conditions, industry and market considerations, overall financial performance

(both current and projected), changes in management and strategy and changes in the composition or carrying amount of net assets.

qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying amount,

a one-step test is then performed in accordance with ASU 2017-04.

Under the simplified model, a goodwill impairment is calculated as the

difference between the carrying amount of the reporting unit and its fair value.

The Company performed a qualitative assessment

for its 2024 analysis of goodwill.

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

value of the reporting unit exceeds its fair value.

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

no impairment issues with respect to goodwill as of September 30, 2024.

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

accordance with Accounting Standard Update (“ASU”) 2017-04, Intangibles – Goodwill and Other (Topic 350):

the Accounting for Goodwill Impairment .

Goodwill is first qualitatively assessed to determine whether further impairment testing

is necessary.

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

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

amount of net assets.

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

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

Under the simplified model, a goodwill

impairment is calculated as the difference between the carrying amount of the reporting unit and its fair value.

For its 2025 goodwill analysis, the Company performed a quantitative assessment as of September 30, 2025.

Based on this analysis, management

concluded that the estimated fair value of the reporting unit exceeded its carrying amount.

Accordingly, no impairment charge was recorded,

and goodwill continues to be carried at its current value.

Stock-Based Compensation

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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

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.

4 unchanged sentences

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

Tax positions taken or expected to be

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

Tax positions taken or expected to

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

of being sustained by the applicable tax authorities.

10 unchanged sentences

Financial Statements and Supplementary Data

See the financial statements included in this report beginning on page

Changes in and Disagreements with Accountants

on Accounting and Financial Disclosure

See the financial statements included in this report beginning on

Changes in and Disagreements with

Accountants on Accounting and Financial Disclosure

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

What changed 10-K

Item 7. Management’s Discussion and Analysis