10-Q

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, 2023

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission File Number 001-38174

Citius Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)

Nevada	27-3425913
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

11 Commerce Drive, First Floor, Cranford, NJ	07016
(Address of principal executive offices)	(Zip code)

(908) 967-6677

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common stock, $0.001 par value	CTXR	Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit such files). Yes ☒  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒

As of August 10, 2023, there were 158,857,798 shares of common stock, $0.001 par value, of the registrant issued and outstanding.

Citius Pharmaceuticals, Inc.

FORM 10-Q

TABLE OF CONTENTS

June 30, 2023

		Page
PART I. FINANCIAL INFORMATION:		1
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets at June 30, 2023 and September 30, 2022	1
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended June 30, 2023 and 2022	2
	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended June 30, 2023 and 2022	3
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2023 and 2022	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	20
Item 4.	Controls and Procedures	20
PART II. OTHER INFORMATION		21
Item 1.	Legal Proceedings	21
Item 1A.	Risk Factors	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3.	Defaults Upon Senior Securities	21
Item 4.	Mine Safety Disclosures	21
Item 5.	Other Information	21
Item 6.	Exhibits	22
	SIGNATURES	23

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EXPLANATORY NOTE

In this Quarterly Report on Form 10-Q, and unless the context otherwise requires, the “Company,” “we,” “us,” and “our” refer to Citius Pharmaceuticals, Inc. and its wholly-owned subsidiaries Citius Pharmaceuticals, LLC, Leonard-Meron Biosciences, Inc., Citius Oncology, Inc. (formerly Citius Acquisition Corp.), and its majority-owned subsidiary, NoveCite, Inc., taken as a whole.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements.” Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and are likely to, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors discussed from time to time in this Report and in other documents which we file with the Securities and Exchange Commission. In addition, such statements could be affected by risks and uncertainties related to:

● our ability to obtain and maintain required regulatory approvals for our product candidates;

● our ability to raise funds for general corporate purposes and operations, including our pre-clinical and clinical trials;

● the commercial feasibility and success of our technology and product candidates;

● the cost, timing and results of our pre-clinical and clinical trials;

● our ability to recruit and retain qualified management and scientific and technical personnel to carry out our operations; and

● the other factors discussed in the “Risk Factors” section of our most recent Annual Report on Form 10-K and elsewhere in this report.

Any forward-looking statements speak only as of the date on which they are made, and except as may be required under applicable securities laws, we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the filing date of this Report.

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

CITIUS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	June 30,			September 30,
	2023			2022
ASSETS
Current Assets:
Cash and cash equivalents	$	33,281,830		$	41,711,690
Prepaid expenses		7,832,320			2,852,580
Total Current Assets		41,114,150			44,564,270
Property and equipment, net		2,010			4,100
Operating lease right-of-use asset, net		503,817			646,074
Other Assets:
Deposits		38,062			38,062
In-process research and development		59,400,000			59,400,000
Goodwill		9,346,796			9,346,796
Total Other Assets		68,784,858			68,784,858
Total Assets	$	110,404,835		$	113,999,302
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	3,079,667		$	1,165,378
Accrued expenses		892,874			1,405,394
Accrued compensation		1,605,445			1,762,251
Operating lease liability		212,871			196,989
Total Current Liabilities		5,790,857			4,530,012
Deferred tax liability		5,993,800			5,561,800
Operating lease liability – noncurrent		320,011			481,245
Total Liabilities		12,104,668			10,573,057
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; 400,000,000 shares authorized; 158,857,798 and 146,211,130 shares issued and outstanding at June 30, 2023 and September 30, 2022, respectively		158,858			146,211
Additional paid-in capital		249,828,398			232,368,121
Accumulated deficit		(152,287,469	)		(129,688,467	)
Total Citius Pharmaceuticals, Inc. Stockholders’ Equity		97,699,787			102,825,865
Non-controlling interest		600,380			600,380
Total Equity		98,300,167			103,426,245
Total Liabilities and Equity	$	110,404,835		$	113,999,302

See notes to unaudited condensed consolidated financial statements.

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CITIUS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2023 AND 2022

(Unaudited)

	Three Months Ended						Nine Months Ended
	June 30,			June 30,			June 30,			June 30,
	2023			2022			2023			2022
Revenues	$	—		$	—		$	—		$	—
Operating Expenses
Research and development		3,764,675			4,888,192			11,937,045			13,798,251
General and administrative		3,733,326			3,024,783			11,129,463			9,038,949
Stock-based compensation – general and administrative		1,174,111			1,003,677			3,540,787			2,929,279
Total Operating Expenses		8,672,112			8,916,652			26,607,295			25,766,479
Operating Loss		(8,672,112	)		(8,916,652	)		(26,607,295	)		(25,766,479	)
Other Income
Interest income		336,780			53,020			854,604			116,573
Gain on sale of New Jersey net operating losses		—			—			3,585,689			—
Total Other Income		336,780			53,020			4,440,293			116,573
Loss before Income Taxes		(8,335,332	)		(8,863,632	)		(22,167,002	)		(25,649,906	)
Income tax expense		144,000			—			432,000			—
Net Loss	$	(8,479,332	)	$	(8,863,632	)	$	(22,599,002	)	$	(25,649,906	)
Net Loss Per Share - Basic and Diluted	$	(0.06	)	$	(0.06	)	$	(0.15	)	$	(0.18	)
Weighted Average Common Shares Outstanding
Basic and diluted		153,775,380			146,129,630			148,746,002			146,061,108

See notes to unaudited condensed consolidated financial statements.

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CITIUS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2023 AND 2022

(Unaudited)

	Preferred		Common Stock				Additional Paid-In		Accumulated			Total Citius Pharmaceuticals, Inc.  Shareholder’s			Non-Controlling		Total
	Stock		Shares		Amount		Capital		Deficit			Equity			Interest		Equity
Balance, October 1, 2022	$	—		146,211,130	$	146,211	$	232,368,121	$	(129,688,467	)	$	102,825,865		$	600,380	$	103,426,245
Stock-based compensation expense		—		—		—		1,201,081		—			1,201,081			—		1,201,081
Net loss		—		—		—		—		(3,593,645	)		(3,593,645	)		—		(3,593,645	)
Balance, December 31, 2022		—		146,211,130		146,211		233,569,202	$	(133,282,112	)	$	100,433,301		$	600,380	$	101,033,681
Issuance of common stock for services		—		100,000		100		101,900		—			102,000			—		102,000
Issuance of common stock upon exercise of stock options		—		46,667		47		31,220		—			31,267			—		31,267
Stock-based compensation expense		—		—		—		1,165,595		—			1,165,595			—		1,165,595
Net loss		—		—		—		—		(10,526,025	)		(10,526,025	)		—		(10,526,025	)
Balance, March 31, 2023		—		146,357,797		146,358		234,867,917		(143,808,137	)		91,206,138			600,380		91,806,518
Issuance of common stock in registered direct offering, net of costs of $1,201,131		—		12,500,001		12,500		13,786,370		—			13,798,870			—		13,798,870
Stock-based compensation expense		—		—		—		1,174,111		—			1,174,111			—		1,174,111
Net loss		—		—		—		—		(8,479,332	)		(8,479,332	)		—		(8,479,332	)
Balance, June 30, 2023	$	—		158,857,798	$	158,858	$	249,828,398	$	(152,287,469	)	$	97,699,787		$	600,380	$	98,300,167
Balance, October 1, 2021	$	—		145,979,429	$	145,979	$	228,084,195	$	(96,047,821	)	$	132,182,353		$	600,380	$	132,782,733
Issuance of common stock for services		—		50,201		50		95,834		—			95,884			—		95,884
Stock-based compensation expense		—		—		—		904,604		—			904,604			—		904,604
Net loss		—		—		—		—		(9,225,220	)		(9,225,220	)		—		(9,225,220	)
Balance, December 31, 2021		—		146,029,630		146,029		229,084,633		(105,273,041	)		123,957,621			600,380		124,558,001
Issuance of common stock for services		—		100,000		100		177,900		—			178,000			—		178,000
Stock-based compensation expense		—		—		—		1,020,998		—			1,020,998			—		1,020,998
Net loss		—		—		—		—		(7,561,054	)		(7,561,054	)		—		(7,561,054	)
Balance, March 31, 2022		—		146,129,630		146,129		230,283,531		(112,834,095	)		117,595,565			600,380		118,195,945
Stock-based compensation expense		—		—		—		1,003,677		—			1,003,677			—		1,003,677
Net loss		—		—		—		—		(8,863,632	)		(8,863,632	)		—		(8,863,632	)
Balance, June 30, 2022	$	—		146,129,630	$	146,129	$	231,287,208	$	(121,697,727	)	$	109,735,610		$	600,380	$	110,335,990

See notes to unaudited condensed consolidated financial statements.

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CITIUS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED JUNE 30, 2023 AND 2022

(Unaudited)

	2023			2022
Cash Flows From Operating Activities:
Net loss	$	(22,599,002	)	$	(25,649,906	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		3,540,787			2,929,279
Issuance of common stock for services		102,000			273,884
Amortization of operating lease right-of-use asset		142,257			131,235
Depreciation		2,090			2,192
Deferred income tax expense		432,000			—
Changes in operating assets and liabilities:
Prepaid expenses		(4,979,740	)		(48,915	)
Accounts payable		1,914,289			413,425
Accrued expenses		(512,520	)		679,239
Accrued compensation		(156,806	)		(628,499	)
Operating lease liability		(145,352	)		(130,686	)
Net Cash Used In Operating Activities		(22,259,997	)		(22,028,752	)
Cash Flows From Financing Activities:
Net proceeds from registered direct offering		13,798,870			—
Proceeds from common stock option exercise		31,267			—
Net Cash Provided By Financing Activities		13,830,137			—
Net Change in Cash and Cash Equivalents		(8,429,860	)		(22,028,752	)
Cash and Cash Equivalents - Beginning of Period		41,711,690			70,072,946
Cash and Cash Equivalents - End of Period	$	33,281,830		$	48,044,194

See notes to unaudited condensed consolidated financial statements.

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CITIUS PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED JUNE 30, 2023 AND 2022

(Unaudited)

1. NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

Citius Pharmaceuticals, Inc. (“Citius,” the “Company,” “we” or “us”) is a late-stage pharmaceutical 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 acquired Leonard-Meron Biosciences, Inc. (“LMB”) as a wholly-owned subsidiary by issuing shares of its common stock.

On September 11, 2020, we formed NoveCite, Inc. (“NoveCite”), a Delaware corporation, of which we own 75% (7,500,000 shares) of the issued and outstanding capital stock (see Note 3).

On August 23, 2021, we formed Citius Acquisition Corp., as a wholly-owned subsidiary in conjunction with the acquisition of I/ONTAK, which began operations in April 2022. On May 2, 2023, Citius Acquisition changed its name to Citius Oncology, Inc. (“Citius Oncology”). Citius has obtained the trade name of Lymphir for I/ONTAK and it is referred to as Lymphir in this Form 10-Q.

In-process research and development (“IPR&D”) consists of (i) the $19,400,000 acquisition value of LMB’s drug candidate Mino-Lok®, which is an antibiotic solution used to treat catheter-related bloodstream infections and is expected to be amortized on a straight-line basis over a period of eight years commencing upon revenue generation, and (ii) the $40,000,000 acquisition value of the exclusive license for Lymphir (denileukin diftitox), which is a late-stage oncology immunotherapy for the treatment of cutaneous T-cell lymphoma (“CTCL”), a rare form of non-Hodgkin lymphoma, and is expected to be amortized on a straight-line basis over a period of twelve years commencing upon revenue generation.

Goodwill of $9,346,796 represents the value of LMB’s industry relationships and its assembled workforce. Goodwill will not be amortized but will be tested at least annually for impairment.

Citius is subject to a number of risks common to companies in the pharmaceutical industry including, but not limited to, risks related to the development by Citius or its competitors of research and development stage product candidates, market acceptance of its product candidates that might be approved, competition from larger companies, dependence on key personnel, dependence on key suppliers and strategic partners, the Company’s ability to obtain additional financing and the Company’s compliance with governmental and other regulations.

Basis of Presentation and Summary of Significant Accounting Policies

Basis of Preparation — The accompanying condensed consolidated financial statements include the operations of Citius Pharmaceuticals, Inc., and its wholly-owned subsidiaries, Citius Pharmaceuticals, LLC, LMB, and Citius Oncology (formerly Citius Acquisition, Inc.), and its majority-owned subsidiary NoveCite. Citius Oncology was inactive until April 1, 2022. All significant inter-company balances and transactions have been eliminated in consolidation.

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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, 2023, and the results of its operations and cash flows for the three and nine month periods ended June 30, 2023 and 2022. The operating results for the three- and nine-month periods ended June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending September 30, 2023. 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 year ended September 30, 2022 filed with the Securities and Exchange Commission (“SEC”).

Use of Estimates — Our accounting principles require our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting period. Estimates having relatively higher significance include the accounting for in-process research and development and goodwill impairment, stock-based compensation, valuation of warrants, 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

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Acquired Contract Assets and Contract Liabilities. Under the new guidance (ASC 805-20-30-28), the acquirer should determine what contract assets and/or contract liabilities it would have recorded under Accounting Standards Codification (“ASC”) 606 (the revenue guidance) as of the acquisition date, as if the acquirer had entered into the original contract at the same date and on the same terms as the acquiree. The recognition and measurement of those contract assets and contract liabilities will likely be comparable to what the acquiree has recorded on its books under ASC 606 as of the acquisition date. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. ASU 2021-08 is effective for the Company in the first quarter of fiscal year 2024. Early adoption is permitted, including in an interim period, for any period for which financial statements have not yet been issued. However, adoption in an interim period other than the first fiscal quarter requires an entity to apply the new guidance to all prior business combinations that have occurred since the beginning of the annual period in which the new guidance is adopted. The Company is currently evaluating the adoption date of ASU 2021-08 and the impact, if any, adoption will have on its financial position and results of operations.

2. LIQUIDITY 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 $22,259,997 for the nine months ended June 30, 2023. As a result of the Company’s common stock offerings and common stock warrant exercises during the year ended September 30, 2021 and the registered direct offering in May 2023, the Company had working capital of approximately $35,323,293 at June 30, 2023. The Company estimates that its available cash resources will be sufficient to fund its operations through August 2024.

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 August 2024, including its development plans for Lymphir, Mino-Lok, Mino-Wrap, Halo-Lido and NoveCite, will depend on its ability to obtain regulatory approval to market Lymphir and/or Mino-Lok and generate substantial revenue from the sale of Lymphir and/or Mino-Lok and on its ability to raise additional capital through various potential sources, such as equity and/or debt financings, strategic relationships, or out-licensing of its product candidates. However, the Company can provide no assurances on regulatory approval, commercialization, or future sales of Lymphir and/or Mino-Lok or that financing or strategic relationships will be available on acceptable terms, or at all. If the Company is unable to raise sufficient capital, find strategic partners or generate substantial revenue from the sale of Lymphir and/or Mino-Lok, there would be a material adverse effect on its business. Further, the Company expects in the future to incur additional expenses as it continues to develop its product candidates, including seeking regulatory approval, and protecting its intellectual property.

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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 of $90,000 in June 2022 and 2021.

LMB will also pay annual royalties on net sales of licensed products, with royalties ranging from the mid-single digits to the low double digits. In limited circumstances in which the licensed product is not subject to a valid patent claim and a competitor is selling a competing product, the royalty rate is in the low- to mid-single digits. 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 an aggregate of $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.

Patent and Technology License Agreement – Mino-Wrap

On January 2, 2019, we entered into a patent and technology license agreement with the Board of Regents of the University of Texas System on behalf of the University of Texas M. D. Anderson Cancer Center (“Licensor”), whereby we in-licensed exclusive worldwide rights to the patented technology for any and all uses relating to breast implants. We intend to develop Mino-Wrap as a liquefying gel-based wrap containing minocycline and rifampin for the reduction of infections associated with breast implants following breast reconstructive surgeries. We are required to use commercially reasonable efforts to commercialize Mino-Wrap under several regulatory scenarios and achieve milestones associated with these regulatory options leading to an approval from the U.S. Food and Drug Administration (“FDA”).

Under the license agreement, the Company paid an annual maintenance fee of $75,000 and $60,000 in January 2023 and 2022, respectively. The annual maintenance fee increases by $15,000 per year up to a maximum of $90,000. Annual maintenance fees cease on the first sale of product. We also must pay up to an aggregate of $2.1 million in milestone payments, contingent on the achievement of various regulatory and commercial milestones. Under the terms of the license agreement, we also must pay a royalty of mid- to upper-single digit percentages of net sales, depending on the amount of annual sales, and subject to downward adjustment to lower- to mid-single digit percentages in the event there is no valid patent for the product in the United States at the time of sale. After the first sale of product, we will owe an annual minimum royalty payment of $100,000 that will increase annually by $25,000 for the duration of the term. We will be responsible for all patent expenses incurred by Licensor for the term of the agreement although Licensor is responsible for the filing, prosecution and maintenance of all patents. Unless earlier terminated by Licensor, based upon the failure by us to achieve certain development and commercial milestones or for various breaches by us, the agreement expires on the later of the expiration of the patents or January 2, 2034.

License Agreement with Novellus

On October 6, 2020, our subsidiary, NoveCite, signed an exclusive license agreement with a subsidiary of Novellus Inc. (“Novellus”). Upon execution of the license agreement, we paid $5,000,000 to Novellus, which was charged to research and development expense during the year ended September 30, 2021, and issued 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 between Novellus and NoveCite, if NoveCite issued additional equity, subject to certain exceptions, NoveCite had to maintain Novellus’s ownership at 25% by issuing additional shares to Novellus.

7

In July 2021, Novellus was acquired by Brooklyn ImmunoTherapeutics, Inc. (“Brooklyn”). In connection with that transaction, the stock subscription agreement between Novellus and NoveCite 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 is responsible for the operational activities of NoveCite and bears all costs necessary to operate NoveCite. Citius’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.

NoveCite is obligated to pay Eterna up to $51,000,000 upon the achievement of various regulatory and developmental milestones. NoveCite also must pay a royalty equal to low double-digit percentages of net sales, commencing upon the sale of a licensed product. This royalty is subject to downward adjustment 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) the date on which a biosimilar product is first marketed, sold, or distributed 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, if 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.

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, the Company entered into a definitive agreement with Dr. Reddy’s Laboratories SA, a subsidiary of Dr. Reddy’s Laboratories, Ltd. (collectively, “Dr. Reddy’s”) to acquire its exclusive license of Lymphir (denileukin diftitox), a late-stage oncology immunotherapy for the treatment of CTCL, a rare form of non-Hodgkin lymphoma.

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Under the terms of this agreement, Citius acquired Dr. Reddy’s exclusive license of Lymphir from Eisai Co., Ltd. (“Eisai”) and other related assets owned by Dr. Reddy’s. Citius’s exclusive license include rights to develop and commercialize Lymphir in all markets except for Japan and certain parts of Asia. Additionally, Citius retained an option on the right to develop and market the product in India. Eisai retains exclusive development and marketing rights for denileukin diftitox in Japan and most Asian countries. Citius paid $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, and up to $300 million for commercial sales milestones. We also must pay on a fiscal quarter basis tiered royalties equal to low double-digit percentages of net product sales. The royalties will end on the earlier of (i) the 15-year anniversary of the first commercial sale of the latest indication that received regulatory approval in the applicable country and (ii) the date on which a biosimilar product results in the reduction of net sales in the applicable product by 50% in two consecutive quarters, as compared to the four quarters prior to the first commercial sale of the biosimilar product. We will also pay 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.

Under the license agreement, Eisai is to receive a $6.0 million development milestone payment upon initial approval and additional commercial milestone payments related to the achievement of net product sales thresholds (which increases to $7 million in the event we have exercised our option to add India to the licensed territory prior to FDA approval) and an aggregate of up to $22 million related to the achievement of net product sales thresholds. We also are required to reimburse Eisai for up to $2.65 million of its costs to complete the ongoing Phase 3 pivotal clinical trial for 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 will be responsible for completing the current CTCL clinical trial, and chemistry, manufacturing, and controls (CMC) activities through the filing of the BLA for Lymphir with the FDA (which was filed in September 2022). Citius will be responsible for development costs associated with potential additional indications.

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, until 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 agreement with Dr. Reddy’s, we are required to (i) use commercially reasonable efforts to make commercially available products in the CTCL indication, (ii) initiate two investigator initiated immuno-oncology trials (which we initiated in June 2021 and September 2022, respectively), (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.

4. COMMON STOCK, STOCK OPTIONS AND WARRANTS

Common Stock Issued for Services

On November 2, 2021, the Company issued 50,201 shares of common stock for investor relations services and expensed the $95,884 fair value of the common stock issued.

On March 21, 2022, the Company issued 100,000 shares of common stock for media, public and investor relations services and expensed the $178,000 fair value of the common stock issued.

On September 13, 2022, the Company issued 81,500 shares of common stock for media, public and investor relations services and expensed the $104,320 fair value of the common stock issued.

On March 27, 2023, the Company issued 100,000 shares of common stock for media, public and investor relations services and expensed the $102,000 fair value of the common stock issued.

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Common Stock Offering

On May 8, 2023, the Company closed a registered direct offering of 12,500,001 common shares and warrants to purchase up to 12,500,001 common shares, at a purchase price of $1.20 per share and accompanying warrant for gross proceeds of $15,000,001. The warrants have an exercise price of $1.50 per share, are exercisable six months from the date of issuance, and expire five years from the date of issuance. The estimated fair value of the warrants issued to the investors was approximately $11,000,000.

Net proceeds were $13,798,870 after deducting the placement agent fee of $1,050,000, placement agent expenses of $85,000, legal fees of $50,181, and other offering expenses of $15,950. The Company also issued 875,000 warrants to the placement agent at an exercise price of $1.50 per share, that are exercisable six months from the date of issuance, and expire five years from the date of issuance. The estimated fair value of the warrants issued to the placement agent was approximately $771,000.

Stock Option Plans

Under our 2014 Stock Incentive Plan, we reserved 866,667 common shares for issuance to employees, directors, and consultants. As of June 30, 2023, options to purchase 795,171 shares were outstanding and no shares remain available for future grants.

Under our 2018 Omnibus Stock Incentive Plan, we reserved 2,000,000 common shares for issuance to employees, directors, and consultants. As of June 30, 2023, options to purchase 1,760,000 shares were outstanding and no shares remain available for future grants.

Under our 2020 Omnibus Stock Incentive Plan, we reserved 3,110,000 common shares for issuance to employees, directors, and consultants. As of June 30, 2023, options to purchase 1,820,000 shares were outstanding, options to purchase 50,000 shares were forfeited, and the remaining 1,240,000 shares were transferred to the 2021 Omnibus Stock Incentive Plan (“2021 Stock Plan”).

Under our 2021 Omnibus Stock Incentive Plan, we reserved 8,740,000 shares for issuance to employees, directors, and consultants through options, SARs, dividend equivalent rights, restricted stock, restricted stock units, or other rights. As of June 30, 2023, options to purchase 8,705,000 shares were outstanding and the remaining 35,000 shares were transferred to the 2023 Omnibus Stock Incentive Plan (the “2023 Stock Plan”).

In November 2022, our Board approved the Citius Pharmaceuticals, Inc. 2023 Stock Plan, subject to stockholder approval, which was received on February 7, 2023. The 2023 Stock Plan has reserved for issuance 12,035,000 shares of our common stock. As of June 30, 2023, options to purchase 300,000 shares were outstanding under the 2023 Stock Plan and 11,735,000 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. 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.

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A summary of option activity under our stock option plans (excluding the NoveCite 2020 Omnibus Stock Incentive Plan) is presented below:

	Option Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at October 1, 2022		9,400,171		$	2.07	7.81 years	$	869,509
Granted		4,150,000			1.26
Exercised		(46,667	)		0.67			34,067
Forfeited or expired		(123,333	)		5.52
Outstanding at June 30, 2023		13,380,171		$	1.79	7.78 years	$	815,287
Exercisable at June 30, 2023		6,200,170		$	2.09	6.57 years	$	747,453

On October 4, 2022, the Board of Directors granted options to purchase 3,375,000 shares to employees, 375,000 shares to directors and 50,000 shares to a consultant at $1.25 per share. On November 8, 2022, the Board of Directors granted options to purchase 50,000 shares to a consultant at $1.04 per share. On February 7, 2023, the Board of Directors granted options to purchase 150,000 shares to an employee and 75,000 shares to a director at $1.42 per share. On April 10, 2023, the Board of Directors granted options to purchase 75,000 shares to an employee at $1.46 per share. The weighted average grant date fair value of the options granted during the nine months ended June 30, 2023 was estimated at $0.98 per share. These options vest over terms of 12 to 36 months and have a term of 10 years.

On October 11, 2021, the Board of Directors granted options to purchase 2,515,000 shares to employees, 375,000 shares to directors and 175,000 shares to consultants at $2.04 per share. On November 1, 2021, the Board of Directors granted options to purchase 200,000 shares to an employee at $1.87 per share. During January and February 2022, options to purchase 300,000 shares were granted to three new employees at exercise prices ranging from $1.44 to $1.49 per share. In April and June 2022, options to purchase 80,000 shares were granted to two new employees at exercise prices ranging from $0.90 to $1.47 per share. The weighted average grant date fair value of the options granted during the nine months ended June 30, 2022 was estimated at $1.67 per share. These options vest over terms of 12 to 36 months and have a term of 10 years.

Stock-based compensation expense for the three months ended June 30, 2023 and 2022 was $1,174,111 (including $31,858 for the NoveCite Stock Plan) and $1,003,677 (including $33,333 for the NoveCite Stock Plan), respectively. Stock-based compensation expense for the nine months ended June 30, 2023 and 2022 was $3,540,787 (including $98,524 for the NoveCite Stock Plan) and $2,929,279 (including $99,999 for the NoveCite Stock Plan), respectively.

At June 30, 2023, unrecognized total compensation cost related to unvested awards under the Citius stock plans of $5,925,203 is expected to be recognized over a weighted average period of 1.7 years.

NoveCite Stock Plan - Under the NoveCite Stock Plan, 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, 2023, there were options outstanding to purchase 1,911,500 common shares of NoveCite and 88,500 shares available for future grants.

As of June 30, 2023, NoveCite has options outstanding to purchase 1,911,500 common shares at a weighted average exercise price of $0.24 per share, of which 1,514,333 are exercisable. These options vest over 36 months and have a term of 10 years. The weighted average remaining contractual term of options outstanding under the NoveCite Stock Plan is 7.65 years. At June 30, 2023, unrecognized total compensation cost related to unvested awards under the NoveCite Stock Plan of $79,433 is expected to be recognized over a weighted average period of 0.8 years.

Citius Oncology Stock Plan - Under the Citius Oncology Stock Plan, adopted on April 29, 2023, we reserved 15,000,000 common shares of Citius Oncology for issuance. The Citius Oncology 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. On July 5, 2023, Citius Oncology granted options to purchase 12,550,000 common shares at an exercise price of $2.15 per share. These options vest over periods from 12 to 36 months and have a term of 10 years.

On July 25, 2023, Citius Oncology granted options to purchase an additional 200,000 common shares at an exercise price of $2.15 per share. These options vest over a period of 12 months and have a term of 10 years.

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Warrants

As of June 30, 2023, we have reserved shares of common stock for the exercise of outstanding warrants as follows:

	Exercise price		Number		Expiration Date
March 2018 Registered Direct/Private Placement Investors	$	2.86		218,972	October 2, 2023
August 2018 Offering Investors		1.15		3,921,569	August 14, 2023
August 2018 Offering Agent		1.59		189,412	August 8, 2023
April 2019 Registered Direct/Private Placement Investors		1.42		1,294,498	April 5, 2024
April 2019 Registered Direct/Private Placement Agent		1.93		240,130	April 5, 2024
September 2019 Offering Investors		0.77		2,793,297	September 27, 2024
September 2019 Offering Underwriter		1.12		194,358	September 27, 2024
February 2020 Exercise Agreement Agent		1.28		138,886	August 19, 2025
May 2020 Registered Direct Offering Investors		1.00		1,670,588	November 18, 2025
May 2020 Registered Direct Offering Agent		1.33		155,647	May 14, 2025
August 2020 Underwriter		1.31		201,967	August 10, 2025
January 2021 Private Placement Investors		1.23		3,091,192	July 27, 2026
January 2021 Private Placement Agent		1.62		351,623	July 27, 2026
February 2021 Offering Investors		1.70		20,580,283	February 19, 2026
February 2021 Offering Agent		1.88		2,506,396	February 19, 2026
May 2023 Registered Direct Offering Investors		1.50		12,500,001	May 8, 2028
May 2023 Registered Direct Offering Agent		1.50		875,000	May 3, 2028
				50,923,819

At June 30, 2023, the weighted average remaining life of the outstanding warrants is 2.9 years, all warrants are exercisable except for the 13,375,001 warrants issued in the May 2023 Registered Direct Offering which become exercisable on November 8, 2023, and the aggregate intrinsic value of the warrants outstanding was $1,747,081.

Common Stock Reserved

A summary of common stock reserved for future issuances as of June 30, 2023 is as follows:

Stock plan options outstanding	13,380,171
Stock plan shares available for future grants	11,735,000
Warrants outstanding	50,923,819
Total	76,038,990

5. OPERATING LEASE

Effective July 1, 2019, Citius entered into a 76-month lease for office space in Cranford, NJ. Citius pays its 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 Company’s lease does not provide an implicit rate, the Company estimated the incremental borrowing rate in calculating the present value of the lease payments based on the remaining lease term as of the adoption date.

● 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.

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The elements of lease expense are as follows: 

Lease cost	Nine Months Ended June 30, 2023			Nine Months Ended June 30, 2022
Operating lease cost	$	179,118		$	179,116
Variable lease cost		3,567			772
Total lease cost	$	182,685		$	179,888
Other information
Weighted-average remaining lease term - operating leases		2.3 Years			3.3 Years
Weighted-average discount rate - operating leases		8.0	%		8.0	%

Maturities of lease liabilities due under the Company’s non-cancellable leases as of June 30, 2023 is as follows:  

Year Ending September 30,	June 30, 2023
2023 (excluding the 9 months ended June 30, 2023)	$	61,952
2024		249,024
2025		253,883
2026		21,460
Total lease payments		586,319
Less: interest		(53,437	)
Present value of lease liabilities	$	532,882

Leases	Classification	June 30, 2023		September 30, 2022
Assets
Lease asset	Operating	$	503,817	$	646,074
Total lease assets		$	503,817	$	646,074
Liabilities
Current	Operating	$	212,871	$	196,989
Non-current	Operating		320,011		481,245
Total lease liabilities		$	532,882	$	678,234

Interest expense on the lease liability was $36,861 and $47,881 for the nine months ended June 30, 2023 and 2022, respectively.

6. GAIN ON SALE OF NEW JERSEY NET OPERATING LOSSES

The Company recognized a gain of $3,585,689 for the nine months ended June 30, 2023 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.

7. SUBSEQUENT EVENTS

On July 29, 2023 the Company received a Complete Response Letter, (“CRL”) from the FDA regarding the BLA seeking approval for Lymphir. The FDA has required Citius to incorporate enhanced product testing, and additional controls agreed to with the FDA during the market application review. Additionally, the FDA raised no concerns relating to the safety and efficacy clinical data package.

Remediation efforts related to the CRL are not expected to impact the Company’s 12-month cash runway.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations for the three- and nine-month periods ended June 30, 2023 should be read together with our unaudited consolidated financial statements and related notes included elsewhere in this report and in conjunction with the audited financial statements of Citius Pharmaceuticals, Inc. included in our Annual Report on Form 10-K for the year ended September 30, 2022. The following discussion contains “forward-looking statements” that reflect our future plans, estimates, beliefs and expected performance. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of a number of factors. We caution that assumptions, expectations, projections, intentions, or beliefs about future events may, and often do, vary from actual results and the differences can be material. Please see “Cautionary Note Regarding Forward-Looking Statements” on page ii of this Report.

Historical Background

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

On March 30, 2016, we acquired all the outstanding stock of Leonard-Meron Biosciences, Inc. (“LMB”) by issuing shares of our common stock. We acquired identifiable intangible assets of $19,400,000 related to in-process research and development and recorded goodwill of $9,346,796 for the excess of the purchase consideration over the net assets acquired.

On September 11, 2020, we formed NoveCite, Inc. (“NoveCite”), a Delaware corporation, of which we own 75% of the issued and outstanding capital stock.

On August 23, 2021, we formed Citius Acquisition Corp., a wholly owned subsidiary, which began operations in April 2022 and which changed its name to Citius Oncology, Inc. (“Citius Oncology”) on May 2, 2023.

In-process research and development of $19,400,000 represents the value of LMB’s 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. Goodwill of $9,346,796 represents the value of LMB’s industry relationships and its assembled workforce. Goodwill will not be amortized but will be tested at least annually for impairment. In-process research and development of $40,000,000 represents the value of our September 2021 acquisition of an 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.

Through June 30, 2023, we have devoted substantially all our efforts to product development, raising capital, building infrastructure through strategic alliances, and coordinating activities relating to our proprietary products. We have not yet realized any revenues from our operations.

Patent and Technology License Agreements

Mino-Lok® - LMB has a patent and technology license agreement with Novel Anti-Infective Therapeutics, Inc. (“NAT”) to develop and commercialize Mino-Lok on an exclusive, worldwide sub-licensable basis, as amended. Since May 2014, LMB has paid an annual maintenance fee, which began at $30,000 and that increased over five years to $90,000, where it will remain until the commencement of commercial sales of a product subject to the license. LMB will also pay annual royalties on net sales of licensed products, with royalties ranging from the mid-single digits to the low double digits. In limited circumstances in which the licensed product is not subject to a valid patent claim and a competitor is selling a competing product, the royalty rate is in the low single digits. After a commercial sale is obtained, LMB must pay minimum aggregate annual royalties that increase in subsequent years. LMB must also pay NAT up to $1,100,000 upon achieving specified regulatory and sales milestones. Finally, LMB must pay NAT a specified percentage of payments received from any sub licensees.

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Mino-Wrap - On January 2, 2019, we entered into a patent and technology license agreement with the Board of Regents of the University of Texas System on behalf of the University of Texas M. D. Anderson Cancer Center (“Licensor”), whereby we in-licensed exclusive worldwide rights to the patented technology for any and all uses relating to breast implants. We intend to develop Mino-Wrap as a liquefying gel-based wrap containing minocycline and rifampin for the reduction of infections associated with breast implants following breast reconstructive surgeries. We are required to use commercially reasonable efforts to commercialize Mino-Wrap under several regulatory scenarios and achieve milestones associated with these regulatory options leading to an approval from the FDA.

Under the license agreement, we paid a nonrefundable upfront payment of $125,000. We are obligated to pay an annual maintenance fee of $30,000, commencing in January 2020 that increases annually by $15,000 per year up to a maximum of $90,000. Annual maintenance fees cease on the first sale of product. We also must pay up to an aggregate of $2.1 million in milestone payments, contingent on the achievement of various regulatory and commercial milestones. Under the terms of the license agreement, we also must pay a royalty of mid- to upper-single digit percentages of net sales, depending on the amount of annual sales, and subject to downward adjustment to lower- to mid-single digit percentages in the event there is no valid patent for the product in the United States at the time of sale. After the first sale of product, we will owe an annual minimum royalty payment of $100,000 that will increase annually by $25,000 for the duration of the term. We will be responsible for all patent expenses incurred by Licensor for the term of the agreement although Licensor is responsible for filing, prosecution, and maintenance of all patents.

NoveCite – 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, to develop and commercialize a stem cell therapy based on the Novelllus’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, NoveCite paid an upfront payment of $5,000,000 to Novellus issued to 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.

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

As part of the Novellus and Brooklyn merger transaction, the 25% non-dilutive position as per the subscription agreement between Novellus and NoveCite was removed.

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 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 a definitive agreement with Dr. Reddy’s to acquire its exclusive license of Lymphir (denileukin diftitox), a late-stage oncology immunotherapy for the treatment of CTCL, a rare form of non-Hodgkin lymphoma.

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Under the terms of this agreement, Citius acquired Dr. Reddy’s exclusive license of Lymphir from Eisai and other related assets owned by Dr. Reddy’s. Citius’s exclusive license rights include rights to develop and commercialize Lymphir in all markets except for Japan and certain parts of Asia. Additionally, Citius has an option on the right to develop and market the product in India. Eisai retains exclusive development and marketing rights for denileukin diftitox in Japan and Asia. Dr. Reddy’s received a $40 million upfront payment and 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. Eisai is to receive a $6 million development milestone payment upon initial approval and additional commercial milestone payments related to the achievement of net product sales thresholds. Eisai will be responsible for completing the current CTCL clinical trial, and chemistry, manufacturing, and controls (CMC) activities through the filing of a BLA for Lymphir with the FDA. Citius will be responsible for development costs associated with potential additional indications.

RESULTS OF OPERATIONS

Three months ended June 30, 2023 compared with the three months ended June 30, 2022

	Three Months Ended June 30, 2023			Three Months Ended June 30, 2022
Revenues	$	—		$	—
Operating expenses:
Research and development		3,764,675			4,888,192
General and administrative		3,733,326			3,024,783
Stock-based compensation expense		1,174,111			1,003,677
Total operating expenses		8,672,112			8,916,652
Operating loss		(8,672,112	)		(8,916,652	)
Interest income		336,780			53,020
Loss before income taxes		(8,335,332	)		(8,863,632	)
Income tax expense		144,000			—
Net loss	$	(8,479,332	)	$	(8,863,632	)

Revenues

We did not generate any revenues for the three months ended June 30, 2023 or 2022.

Research and Development Expenses

For the three months ended June 30, 2023, research and development expenses were $3,764,675 as compared to $4,888,192 during the three months ended June 30, 2022, a decrease of $1,123,517.

Research and development costs for Mino-Lok decreased by $242,634 to $1,091,500 for the three months ended June 30, 2023 as compared to $1,334,134 for the three months ended June 30, 2022, due primarily to decreased start-up costs associated with Biorasi, LLC (“Biorasi”), a global clinical research organization (CRO), to help expand the Company’s Phase 3 Mino-Lok trial to additional sites outside the United States, which are no longer incurred.

Research and development costs for Halo-Lido increased by $485,081 to $1,002,883 for the three months ended June 30, 2023 as compared to $517,802 for the three months ended June 30, 2022 due to higher costs associated with the Phase 2b trial incurred in the three months ended June 30, 2023. On April 3, 2023, Citius announced that enrollment in the Phase 2b trial has been completed. On June 20, 2023, we announced that the high dose formulation of CITI-002, a lidocaine and halobetasol propionate combination formulation, provided a meaningful reduction in symptom severity, as reported by patients, when compared to individual components alone. Moreover, there were no reported significant adverse events and CITI-002 was well tolerated by patients in the study.  Citius intends to schedule an end of Phase 2 meeting with the FDA to begin planning the next steps in the regulatory and clinical development program for CITI-002.

16

Research and development costs for Lymphir were $1,658,838 during the three months ended June 30, 2023 as compared to $1,992,897 for the three months ended June 30, 2022. The $334,059 decrease in expenses was primarily due to the completion and filing of our BLA with the FDA in September 2022.

Research and development costs for NoveCite decreased by $992,937 for the three months ended June 30, 2023 to $16,650 due primarily to manufacturing start up costs incurred in the three months ended June 30, 2022 which are no longer realized.

We expect that research and development expenses will stabilize in fiscal 2023 as we focus on the commercialization of Lymphir and complete our Phase 3 trial for Mino-Lok and our Phase 2b trial for Halo-Lido.

General and Administrative Expenses

For the three months ended June 30, 2023, general and administrative expenses were $3,733,326 as compared to $3,024,783 during the three months ended June 30, 2022. General and administrative expenses increased by $708,543 in comparison with the prior period. The primary reason for the increase were costs associated with pre-launch and market research 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

For the three months ended June 30, 2023, stock-based compensation expense was $1,174,111 as compared to $1,003,677 for the three months ended June 30, 2022. For the three months ended June 30, 2023 and 2022, stock-based compensation includes $31,858 and $33,333, respectively, in expense for the NoveCite stock option plan. Stock-based compensation expense for the most recently completed quarter increased by $170,434 in comparison to the prior period primarily due to new grants made to employees (including new hires), directors and consultants.

Other Income

Interest income for the three months ended June 30, 2023 was $336,780 as compared to interest income of $53,020 for the prior period. The increase is due to higher interest rates on the investment of the remaining proceeds of our equity offerings and common stock warrant exercises in money market accounts.

Income Taxes

The Company recorded deferred income tax expense of $144,000 for the three months ended June 30, 2023, related to the amortization for taxable purposes of its in-process research and development asset. There was no provision for income taxes for the three months ended June 30, 2022 due to the Company’s operating losses and the valuation reserve on deferred tax assets.

Net Loss

For the three months ended June 30, 2023, we incurred a net loss of $8,479,332, compared to a net loss for the three months ended June 30, 2022 of $8,863,632. The $384,300 decrease in the net loss was primarily due to the decrease of $1,123,517 in research and development expenses offset by the increase of $708,543 in general and administrative expenses.

17

Nine months ended June 30, 2023 compared with the nine months ended June 30, 2022

	Nine Months Ended June 30, 2023			Nine Months Ended June 30, 2022
Revenues	$	—		$	—
Operating expenses:
Research and development		11,937,045			13,798,251
General and administrative		11,129,463			9,038,949
Stock-based compensation expense		3,540,787			2,929,279
Total operating expenses		26,607,295			25,766,479
Operating loss		(26,607,295	)		(25,766,479	)
Interest income		854,604			116,573
Gain on sale of New Jersey net operating losses		3,585,689			—
Loss before income taxes		(22,167,002	)		(25,649,906	)
Income tax expense		432,000			—
Net loss	$	(22,599,002	)	$	(25,649,906	)

Revenues

We did not generate any revenues for the nine months ended June 30, 2023 or 2022.

Research and Development Expenses

For the nine months ended June 30, 2023, research and development expenses were $11,937,045 as compared to $13,798,251 during the nine months ended June 30, 2022, a decrease of $1,861,206.

Research and development costs for Mino-Lok increased by $92,829 to $3,309,248 for the nine months ended June 30, 2023 as compared to $3,216,419 for the nine months ended June 30, 2022, due primarily to increased costs associated with the addition of Biorasi, LLC (“Biorasi”), a global clinical research organization (CRO), to help expand the Company’s Phase 3 Mino-Lok trial to additional sites outside the United States.

Research and development costs for Halo-Lido increased by $1,514,702 to $3,733,981 for the nine months ended June 30, 2023 as compared to $2,219,279 for the nine months ended June 30, 2022 due to higher costs associated with the Phase 2b trial incurred in the nine months ended June 30, 2023. On April 3, 2023, Citius announced that enrollment in the Phase 2b trial has been completed. On June 20, 2023, we announced that the high dose formulation of CITI-002, a lidocaine and halobetasol propionate combination formulation, provided a meaningful reduction in symptom severity, as reported by patients, when compared to individual components alone. Moreover, there were no reported significant adverse events and CITI-002 was well tolerated by patients in the study.  Citius intends to schedule an end of Phase 2 meeting with the FDA to begin planning the next steps in the regulatory and clinical development program for CITI-002.

Research and development costs for Lymphir were $4,490,291 during the nine months ended June 30, 2023 as compared to $6,513,262 for the nine months ended June 30, 2022. The $2,022,971 decrease in expenses was primarily due to costs associated with the completed Lymphir phase 3 clinical trial as well as the preparation of the BLA which were incurred in the nine months ended June 30, 2022.

We expect that research and development expenses will stabilize in fiscal 2023 as we focus on the commercialization of Lymphir and complete our Phase 3 trial for Mino-Lok and our Phase 2b trial for Halo-Lido.

General and Administrative Expenses

For the nine months ended June 30, 2023, general and administrative expenses were $11,129,463 as compared to $9,038,949 during the nine months ended June 30, 2022. General and administrative expenses increased by $2,090,514 in comparison with the prior period. The primary reason for the increase was costs associated with pre-launch and market research 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.

18

Stock-based Compensation Expense

For the nine months ended June 30, 2023, stock-based compensation expense was $3,540,787 as compared to $2,929,279 for the nine months ended June 30, 2022. For the nine months ended June 30, 2023 and 2022, stock-based compensation includes $98,524 and $99,999, respectively in expense for the NoveCite stock option plan. Stock-based compensation expense for the most recently completed quarter increased by $611,508 in comparison to the prior period primarily due to new grants made to employees (including new hires), directors and consultants.

Other Income

Interest income for the nine months ended June 30, 2023 was $854,604 as compared to interest income of $116,573 for the prior period. The increase is due to higher interest rates on the investment of the remaining proceeds of our early 2021 equity offerings and common stock warrant exercises in money market accounts.

Other income for the nine months ended June 30, 2023 consists of the $3,585,689 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.

Income Taxes

The Company recorded deferred income tax expense of $432,000 for the nine months ended June 30, 2023, related to the amortization for taxable purposes of its in-process research and development asset. There was no provision for income taxes for the nine months ended June 30, 2022 due to the Company’s operating losses and the valuation reserve on deferred tax assets.

Net Loss

For the nine months ended June 30, 2023, we incurred a net loss of $22,599,002, compared to a net loss for the nine months ended June 30, 2022 of $25,649,906. The $3,050,904 decrease in the net loss was primarily due to the increase of $4,323,720 in other income offset by an aggregate increase in operating expenses of $840,816 and a $432,000 increase in income tax expense.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity and Working Capital

Citius has incurred operating losses since inception and incurred a net loss of $22,599,002 for the nine months ended June 30, 2023. At June 30, 2023, Citius had an accumulated deficit of $152,287,469. Citius’ net cash used in operations during the nine months ended June 30, 2023 was $22,259,997.

As a result of the Company’s common stock offerings and common stock warrant exercises during the year ended September 30, 2021 and the May 2023 registered direct offering, the Company had working capital of approximately $35,300,000 at June 30, 2023. At June 30, 2023, Citius had cash and cash equivalents of $33,281,830 available to fund its operations. The Company’s primary sources of cash flow since inception have been from financing activities. 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.

Based on our cash and cash equivalents at June 30, 2023, we expect that we will have sufficient funds to continue our operations through August 2024. We expect to need to raise additional capital in the future to support our operations beyond August 2024. 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.

19

Inflation

Our management believes that inflation has not had a material effect on our results of operations.

Off Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Critical Accounting Policies and Estimates

The preparation of our financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities as of the date of the financial statements and the amounts of revenues and expenses recorded during the reporting periods. We base our estimates on historical experience, where applicable, and other assumptions that we believe are reasonable under the circumstances. Actual results may differ from our estimates under different assumptions or conditions.

Our critical accounting policies and use of estimates are discussed in, and should be read in conjunction with, the annual consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2022 filed with the SEC.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the specified time periods and accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding disclosure.

Our Chief Executive Officer (who is our principal executive officer) and Chief Financial Officer (who is our principal financial officer and principal accounting officer), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of June 30, 2023. In designing and evaluating disclosure controls and procedures, we recognize that any disclosure controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objective. As of June 30, 2023, based on the evaluation of these disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.

Changes In Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

20

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

There has been no change in the Company’s risk factors since the Company’s Form 10-K filed with the SEC on December 22, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

In August 2023, we extended the term by one year to August 14, 2024 for an aggregate of 3,921,569 warrants with an exercise price of $1.15 per share of common stock. The warrants are held by Leonard Mazur, the Company’s Chief Executive Officer and Chairman of the Board of Directors, and Myron Holubiak, the Company’s Executive Vice President and member of the Board of Directors, and were originally issued in August 2018 in a private placement conducted simultaneously with a registered direct offering of shares of common stock (the “2018 Offering”) managed by H. C. Wainwright & Co., LLC (“Wainwright”). Mr. Mazur and Mr. Holubiak participated in the private placement on the same basis as all other investors. Additionally, 189,412 placement agent warrants with an exercise price of $1.5938 per share issued in connection with the 2018 Offering were extended by one year to August 8, 2024. Such placement agent warrants are held by certain representatives of Wainwright. There are no other warrants remaining outstanding from the 2018 Offering and if such warrants are fully exercised, the Company would receive $4,811,680 in cash proceeds.

21

Item 6. Exhibits

31.1	Certification of the Principal Executive Officer pursuant to Exchange Act Rule 13a-14(a).*
31.2	Certification of the Principal Financial Officer pursuant to Exchange Act Rule 13a-14(a).*
32.1	Certification of the Principal Executive and Principal Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.*
EX-101.INS	Inline XBRL Instance Document*
EX-101.SCH	Inline XBRL Taxonomy Extension Schema Document*
EX-101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document*
EX-101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document*
EX-101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document*
EX-101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document*
EX-104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith.

22

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CITIUS PHARMACEUTICALS, INC.
Date: August 14, 2023	By:	/s/ Leonard Mazur
		Leonard Mazur
		Chief Executive Officer (Principal Executive Officer)
Date: August 14, 2023	By:	/s/ Jaime Bartushak
		Jaime Bartushak
		Chief Financial Officer (Principal Financial and Accounting Officer)

23

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

 I, Leonard Mazur, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Citius Pharmaceuticals, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 14, 2023	By: /s/ Leonard Mazur
	Leonard Mazur
	Chief Executive Officer and Chairman
	(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

 I, Jaime Bartushak, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Citius Pharmaceuticals, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 14, 2023	By: /s/ Jaime Bartushak
	Jaime Bartushak
	Chief Financial Officer
	(Principal Financial Officer and Principal Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER AND THE PRINCIPAL FINANCIAL OFFICER

PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Citius Pharmaceuticals, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Leonard Mazur, Chief Executive Officer and Chairman Company, and Jaime Bartushak, Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 14, 2023	By: /s/ Leonard Mazur
	Leonard Mazur
	Chief Executive Officer and Chairman
	(Principal Executive Officer)

By: /s/ Jaime Bartushak

Jaime Bartushak

Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)

XML

Document And Entity Information - shares	9 Months Ended
	Jun. 30, 2023	Aug. 10, 2023
Document Information Line Items
Entity Registrant Name	Citius Pharmaceuticals, Inc.
Trading Symbol	CTXR
Document Type	10-Q
Current Fiscal Year End Date	--09-30
Entity Common Stock, Shares Outstanding		158,857,798
Amendment Flag	false
Entity Central Index Key	0001506251
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Document Period End Date	Jun. 30, 2023
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q3
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Document Quarterly Report	true
Document Transition Report	false
Entity File Number	001-38174
Entity Incorporation, State or Country Code	NV
Entity Tax Identification Number	27-3425913
Entity Address, Address Line One	11 Commerce Drive
Entity Address, Address Line Two	First Floor
Entity Address, City or Town	Cranford
Entity Address, State or Province	NJ
Entity Address, Postal Zip Code	07016
City Area Code	(908)
Local Phone Number	967-6677
Title of 12(b) Security	Common stock, $0.001 par value
Security Exchange Name	NASDAQ
Entity Interactive Data Current	Yes

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($)	Jun. 30, 2023	Sep. 30, 2022
Current Assets:
Cash and cash equivalents	$ 33,281,830	$ 41,711,690
Prepaid expenses	7,832,320	2,852,580
Total Current Assets	41,114,150	44,564,270
Property and equipment, net	2,010	4,100
Operating lease right-of-use asset, net	503,817	646,074
Other Assets:
Deposits	38,062	38,062
In-process research and development	59,400,000	59,400,000
Goodwill	9,346,796	9,346,796
Total Other Assets	68,784,858	68,784,858
Total Assets	110,404,835	113,999,302
Current Liabilities:
Accounts payable	3,079,667	1,165,378
Accrued expenses	892,874	1,405,394
Accrued compensation	1,605,445	1,762,251
Operating lease liability	212,871	196,989
Total Current Liabilities	5,790,857	4,530,012
Deferred tax liability	5,993,800	5,561,800
Operating lease liability – noncurrent	320,011	481,245
Total Liabilities	12,104,668	10,573,057
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; 400,000,000 shares authorized; 158,857,798 and 146,211,130 shares issued and outstanding at June 30, 2023 and September 30, 2022, respectively	158,858	146,211
Additional paid-in capital	249,828,398	232,368,121
Accumulated deficit	(152,287,469)	(129,688,467)
Total Citius Pharmaceuticals, Inc. Stockholders’ Equity	97,699,787	102,825,865
Non-controlling interest	600,380	600,380
Total Equity	98,300,167	103,426,245
Total Liabilities and Equity	$ 110,404,835	$ 113,999,302

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parentheticals) - $ / shares	Jun. 30, 2023	Sep. 30, 2022
Statement of Financial Position [Abstract]
Preferred stock, par value (in Dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value (in Dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	400,000,000	400,000,000
Common stock, shares issued	158,857,798	146,211,130
Common stock, shares outstanding	158,857,798	146,211,130

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Income Statement [Abstract]
Revenues
Operating Expenses
Research and development	3,764,675	4,888,192	11,937,045	13,798,251
General and administrative	3,733,326	3,024,783	11,129,463	9,038,949
Stock-based compensation – general and administrative	1,174,111	1,003,677	3,540,787	2,929,279
Total Operating Expenses	8,672,112	8,916,652	26,607,295	25,766,479
Operating Loss	(8,672,112)	(8,916,652)	(26,607,295)	(25,766,479)
Other Income
Interest income	336,780	53,020	854,604	116,573
Gain on sale of New Jersey net operating losses			3,585,689
Total Other Income	336,780	53,020	4,440,293	116,573
Loss before Income Taxes	(8,335,332)	(8,863,632)	(22,167,002)	(25,649,906)
Income tax expense	144,000		432,000
Net Loss	$ (8,479,332)	$ (8,863,632)	$ (22,599,002)	$ (25,649,906)
Net Loss Per Share - Basic (in Dollars per share)	$ (0.06)	$ (0.06)	$ (0.15)	$ (0.18)
Weighted Average Common Shares Outstanding
Basic (in Shares)	153,775,380	146,129,630	148,746,002	146,061,108

XML

Condensed Consolidated Statements of Operations (Unaudited) (Parentheticals) - $ / shares	3 Months Ended		9 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Income Statement [Abstract]
Net Loss Per Share - Diluted	$ (0.06)	$ (0.06)	$ (0.15)	$ (0.18)
Diluted	153,775,380	146,129,630	148,746,002	146,061,108

XML

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) - USD ($)	Preferred Stock	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Total Citius Pharmaceuticals, Inc. Shareholder’s Equity	Non-Controlling Interest	Total
Balance at Sep. 30, 2021		$ 145,979	$ 228,084,195	$ (96,047,821)	$ 132,182,353	$ 600,380	$ 132,782,733
Balance (in Shares) at Sep. 30, 2021		145,979,429
Issuance of common stock for services		$ 50	95,834		95,884		95,884
Issuance of common stock for services (in Shares)		50,201
Stock-based compensation expense			904,604		904,604		904,604
Net loss				(9,225,220)	(9,225,220)		(9,225,220)
Balance at Dec. 31, 2021		$ 146,029	229,084,633	(105,273,041)	123,957,621	600,380	124,558,001
Balance (in Shares) at Dec. 31, 2021		146,029,630
Balance at Sep. 30, 2021		$ 145,979	228,084,195	(96,047,821)	132,182,353	600,380	132,782,733
Balance (in Shares) at Sep. 30, 2021		145,979,429
Net loss							(25,649,906)
Balance at Jun. 30, 2022		$ 146,129	231,287,208	(121,697,727)	109,735,610	600,380	110,335,990
Balance (in Shares) at Jun. 30, 2022		146,129,630
Balance at Dec. 31, 2021		$ 146,029	229,084,633	(105,273,041)	123,957,621	600,380	124,558,001
Balance (in Shares) at Dec. 31, 2021		146,029,630
Issuance of common stock for services		$ 100	177,900		178,000		178,000
Issuance of common stock for services (in Shares)		100,000
Stock-based compensation expense			1,020,998		1,020,998		1,020,998
Net loss				(7,561,054)	(7,561,054)		(7,561,054)
Balance at Mar. 31, 2022		$ 146,129	230,283,531	(112,834,095)	117,595,565	600,380	118,195,945
Balance (in Shares) at Mar. 31, 2022		146,129,630
Stock-based compensation expense			1,003,677		1,003,677		1,003,677
Net loss				(8,863,632)	(8,863,632)		(8,863,632)
Balance at Jun. 30, 2022		$ 146,129	231,287,208	(121,697,727)	109,735,610	600,380	110,335,990
Balance (in Shares) at Jun. 30, 2022		146,129,630
Balance at Sep. 30, 2022		$ 146,211	232,368,121	(129,688,467)	102,825,865	600,380	103,426,245
Balance (in Shares) at Sep. 30, 2022		146,211,130
Stock-based compensation expense			1,201,081		1,201,081		1,201,081
Net loss				(3,593,645)	(3,593,645)		(3,593,645)
Balance at Dec. 31, 2022		$ 146,211	233,569,202	(133,282,112)	100,433,301	600,380	101,033,681
Balance (in Shares) at Dec. 31, 2022		146,211,130
Balance at Sep. 30, 2022		$ 146,211	232,368,121	(129,688,467)	102,825,865	600,380	$ 103,426,245
Balance (in Shares) at Sep. 30, 2022		146,211,130
Issuance of common stock upon exercise of stock options (in Shares)							46,667
Net loss							$ (22,599,002)
Balance at Jun. 30, 2023		$ 158,858	249,828,398	(152,287,469)	97,699,787	600,380	98,300,167
Balance (in Shares) at Jun. 30, 2023		158,857,798
Balance at Dec. 31, 2022		$ 146,211	233,569,202	(133,282,112)	100,433,301	600,380	101,033,681
Balance (in Shares) at Dec. 31, 2022		146,211,130
Issuance of common stock for services		$ 100	101,900		102,000		102,000
Issuance of common stock for services (in Shares)		100,000
Issuance of common stock upon exercise of stock options		$ 47	31,220		31,267		31,267
Issuance of common stock upon exercise of stock options (in Shares)		46,667
Stock-based compensation expense			1,165,595		1,165,595		1,165,595
Net loss				(10,526,025)	(10,526,025)		(10,526,025)
Balance at Mar. 31, 2023		$ 146,358	234,867,917	(143,808,137)	91,206,138	600,380	91,806,518
Balance (in Shares) at Mar. 31, 2023		146,357,797
Issuance of common stock in registered direct offering, net of costs of $1,201,131		$ 12,500	13,786,370		13,798,870		13,798,870
Issuance of common stock in registered direct offering, net of costs of $1,201,131 (in Shares)		12,500,001
Stock-based compensation expense			1,174,111		1,174,111		1,174,111
Net loss				(8,479,332)	(8,479,332)		(8,479,332)
Balance at Jun. 30, 2023		$ 158,858	$ 249,828,398	$ (152,287,469)	$ 97,699,787	$ 600,380	$ 98,300,167
Balance (in Shares) at Jun. 30, 2023		158,857,798

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Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) (Parentheticals)	3 Months Ended
	Jun. 30, 2023 USD ($)
Statement of Stockholders' Equity [Abstract]
Issuance of common stock in registered direct offering, net of costs	$ 1,201,131

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Cash Flows From Operating Activities:
Net loss	$ (22,599,002)	$ (25,649,906)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense	3,540,787	2,929,279
Issuance of common stock for services	102,000	273,884
Amortization of operating lease right-of-use asset	142,257	131,235
Depreciation	2,090	2,192
Deferred income tax expense	432,000
Changes in operating assets and liabilities:
Prepaid expenses	(4,979,740)	(48,915)
Accounts payable	1,914,289	413,425
Accrued expenses	(512,520)	679,239
Accrued compensation	(156,806)	(628,499)
Operating lease liability	(145,352)	(130,686)
Net Cash Used In Operating Activities	(22,259,997)	(22,028,752)
Cash Flows From Financing Activities:
Net proceeds from registered direct offering	13,798,870
Proceeds from common stock option exercise	31,267
Net Cash Provided By Financing Activities	13,830,137
Net Change in Cash and Cash Equivalents	(8,429,860)	(22,028,752)
Cash and Cash Equivalents - Beginning of Period	41,711,690	70,072,946
Cash and Cash Equivalents - End of Period	$ 33,281,830	$ 48,044,194

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Nature of Operations, Basis of Presentation and Summary of Significant Accounting Policies

9 Months Ended

Jun. 30, 2023

Nature of Operations, Basis of Presentation and Summary of Significant Accounting Policies[Abstract]

NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1. NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

Citius Pharmaceuticals, Inc. (“Citius,” the “Company,” “we” or “us”) is a late-stage pharmaceutical 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 acquired Leonard-Meron Biosciences, Inc. (“LMB”) as a wholly-owned subsidiary by issuing shares of its common stock.

On September 11, 2020, we formed NoveCite, Inc. (“NoveCite”), a Delaware corporation, of which we own 75% (7,500,000 shares) of the issued and outstanding capital stock (see Note 3).

On August 23, 2021, we formed Citius Acquisition Corp., as a wholly-owned subsidiary in conjunction with the acquisition of I/ONTAK, which began operations in April 2022. On May 2, 2023, Citius Acquisition changed its name to Citius Oncology, Inc. (“Citius Oncology”). Citius has obtained the trade name of Lymphir for I/ONTAK and it is referred to as Lymphir in this Form 10-Q.

In-process research and development (“IPR&D”) consists of (i) the $19,400,000 acquisition value of LMB’s drug candidate Mino-Lok®, which is an antibiotic solution used to treat catheter-related bloodstream infections and is expected to be amortized on a straight-line basis over a period of eight years commencing upon revenue generation, and (ii) the $40,000,000 acquisition value of the exclusive license for Lymphir (denileukin diftitox), which is a late-stage oncology immunotherapy for the treatment of cutaneous T-cell lymphoma (“CTCL”), a rare form of non-Hodgkin lymphoma, and is expected to be amortized on a straight-line basis over a period of twelve years commencing upon revenue generation.

Goodwill of $9,346,796 represents the value of LMB’s industry relationships and its assembled workforce. Goodwill will not be amortized but will be tested at least annually for impairment.

Citius is subject to a number of risks common to companies in the pharmaceutical industry including, but not limited to, risks related to the development by Citius or its competitors of research and development stage product candidates, market acceptance of its product candidates that might be approved, competition from larger companies, dependence on key personnel, dependence on key suppliers and strategic partners, the Company’s ability to obtain additional financing and the Company’s compliance with governmental and other regulations.

Basis of Presentation and Summary of Significant Accounting Policies

Basis of Preparation — The accompanying condensed consolidated financial statements include the operations of Citius Pharmaceuticals, Inc., and its wholly-owned subsidiaries, Citius Pharmaceuticals, LLC, LMB, and Citius Oncology (formerly Citius Acquisition, Inc.), and its majority-owned subsidiary NoveCite. Citius Oncology was inactive until April 1, 2022. 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, 2023, and the results of its operations and cash flows for the three and nine month periods ended June 30, 2023 and 2022. The operating results for the three- and nine-month periods ended June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending September 30, 2023. 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 year ended September 30, 2022 filed with the Securities and Exchange Commission (“SEC”).

Use of Estimates — Our accounting principles require our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting period. Estimates having relatively higher significance include the accounting for in-process research and development and goodwill impairment, stock-based compensation, valuation of warrants, 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

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Acquired Contract Assets and Contract Liabilities. Under the new guidance (ASC 805-20-30-28), the acquirer should determine what contract assets and/or contract liabilities it would have recorded under Accounting Standards Codification (“ASC”) 606 (the revenue guidance) as of the acquisition date, as if the acquirer had entered into the original contract at the same date and on the same terms as the acquiree. The recognition and measurement of those contract assets and contract liabilities will likely be comparable to what the acquiree has recorded on its books under ASC 606 as of the acquisition date. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. ASU 2021-08 is effective for the Company in the first quarter of fiscal year 2024. Early adoption is permitted, including in an interim period, for any period for which financial statements have not yet been issued. However, adoption in an interim period other than the first fiscal quarter requires an entity to apply the new guidance to all prior business combinations that have occurred since the beginning of the annual period in which the new guidance is adopted. The Company is currently evaluating the adoption date of ASU 2021-08 and the impact, if any, adoption will have on its financial position and results of operations.

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Liquidity and Management's Plan

9 Months Ended

Jun. 30, 2023

Liquidity and Managements Plan [Abstract]

LIQUIDITY AND MANAGEMENT'S PLAN

2. LIQUIDITY 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 $22,259,997 for the nine months ended June 30, 2023. As a result of the Company’s common stock offerings and common stock warrant exercises during the year ended September 30, 2021 and the registered direct offering in May 2023, the Company had working capital of approximately $35,323,293 at June 30, 2023. The Company estimates that its available cash resources will be sufficient to fund its operations through August 2024.

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 August 2024, including its development plans for Lymphir, Mino-Lok, Mino-Wrap, Halo-Lido and NoveCite, will depend on its ability to obtain regulatory approval to market Lymphir and/or Mino-Lok and generate substantial revenue from the sale of Lymphir and/or Mino-Lok and on its ability to raise additional capital through various potential sources, such as equity and/or debt financings, strategic relationships, or out-licensing of its product candidates. However, the Company can provide no assurances on regulatory approval, commercialization, or future sales of Lymphir and/or Mino-Lok or that financing or strategic relationships will be available on acceptable terms, or at all. If the Company is unable to raise sufficient capital, find strategic partners or generate substantial revenue from the sale of Lymphir and/or Mino-Lok, there would be a material adverse effect on its business. Further, the Company expects in the future to incur additional expenses as it continues to develop its product candidates, including seeking regulatory approval, and protecting its intellectual property.

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Patent and Technology License Agreements

9 Months Ended

Jun. 30, 2023

Patent and Technology License Agreements [Abstract]

PATENT AND TECHNOLOGY LICENSE AGREEMENTS

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 of $90,000 in June 2022 and 2021.

LMB will also pay annual royalties on net sales of licensed products, with royalties ranging from the mid-single digits to the low double digits. In limited circumstances in which the licensed product is not subject to a valid patent claim and a competitor is selling a competing product, the royalty rate is in the low- to mid-single digits. 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 an aggregate of $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.

Patent and Technology License Agreement – Mino-Wrap

On January 2, 2019, we entered into a patent and technology license agreement with the Board of Regents of the University of Texas System on behalf of the University of Texas M. D. Anderson Cancer Center (“Licensor”), whereby we in-licensed exclusive worldwide rights to the patented technology for any and all uses relating to breast implants. We intend to develop Mino-Wrap as a liquefying gel-based wrap containing minocycline and rifampin for the reduction of infections associated with breast implants following breast reconstructive surgeries. We are required to use commercially reasonable efforts to commercialize Mino-Wrap under several regulatory scenarios and achieve milestones associated with these regulatory options leading to an approval from the U.S. Food and Drug Administration (“FDA”).

Under the license agreement, the Company paid an annual maintenance fee of $75,000 and $60,000 in January 2023 and 2022, respectively. The annual maintenance fee increases by $15,000 per year up to a maximum of $90,000. Annual maintenance fees cease on the first sale of product. We also must pay up to an aggregate of $2.1 million in milestone payments, contingent on the achievement of various regulatory and commercial milestones. Under the terms of the license agreement, we also must pay a royalty of mid- to upper-single digit percentages of net sales, depending on the amount of annual sales, and subject to downward adjustment to lower- to mid-single digit percentages in the event there is no valid patent for the product in the United States at the time of sale. After the first sale of product, we will owe an annual minimum royalty payment of $100,000 that will increase annually by $25,000 for the duration of the term. We will be responsible for all patent expenses incurred by Licensor for the term of the agreement although Licensor is responsible for the filing, prosecution and maintenance of all patents. Unless earlier terminated by Licensor, based upon the failure by us to achieve certain development and commercial milestones or for various breaches by us, the agreement expires on the later of the expiration of the patents or January 2, 2034.

License Agreement with Novellus

On October 6, 2020, our subsidiary, NoveCite, signed an exclusive license agreement with a subsidiary of Novellus Inc. (“Novellus”). Upon execution of the license agreement, we paid $5,000,000 to Novellus, which was charged to research and development expense during the year ended September 30, 2021, and issued 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 between Novellus and NoveCite, 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”). In connection with that transaction, the stock subscription agreement between Novellus and NoveCite 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 is responsible for the operational activities of NoveCite and bears all costs necessary to operate NoveCite. Citius’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.

NoveCite is obligated to pay Eterna up to $51,000,000 upon the achievement of various regulatory and developmental milestones. NoveCite also must pay a royalty equal to low double-digit percentages of net sales, commencing upon the sale of a licensed product. This royalty is subject to downward adjustment 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) the date on which a biosimilar product is first marketed, sold, or distributed 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, if 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.

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, the Company entered into a definitive agreement with Dr. Reddy’s Laboratories SA, a subsidiary of Dr. Reddy’s Laboratories, Ltd. (collectively, “Dr. Reddy’s”) to acquire its exclusive license of Lymphir (denileukin diftitox), a late-stage oncology immunotherapy for the treatment of CTCL, a rare form of non-Hodgkin lymphoma.

Under the terms of this agreement, Citius acquired Dr. Reddy’s exclusive license of Lymphir from Eisai Co., Ltd. (“Eisai”) and other related assets owned by Dr. Reddy’s. Citius’s exclusive license include rights to develop and commercialize Lymphir in all markets except for Japan and certain parts of Asia. Additionally, Citius retained an option on the right to develop and market the product in India. Eisai retains exclusive development and marketing rights for denileukin diftitox in Japan and most Asian countries. Citius paid $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, and up to $300 million for commercial sales milestones. We also must pay on a fiscal quarter basis tiered royalties equal to low double-digit percentages of net product sales. The royalties will end on the earlier of (i) the 15-year anniversary of the first commercial sale of the latest indication that received regulatory approval in the applicable country and (ii) the date on which a biosimilar product results in the reduction of net sales in the applicable product by 50% in two consecutive quarters, as compared to the four quarters prior to the first commercial sale of the biosimilar product. We will also pay 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.

Under the license agreement, Eisai is to receive a $6.0 million development milestone payment upon initial approval and additional commercial milestone payments related to the achievement of net product sales thresholds (which increases to $7 million in the event we have exercised our option to add India to the licensed territory prior to FDA approval) and an aggregate of up to $22 million related to the achievement of net product sales thresholds. We also are required to reimburse Eisai for up to $2.65 million of its costs to complete the ongoing Phase 3 pivotal clinical trial for 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 will be responsible for completing the current CTCL clinical trial, and chemistry, manufacturing, and controls (CMC) activities through the filing of the BLA for Lymphir with the FDA (which was filed in September 2022). Citius will be responsible for development costs associated with potential additional indications.

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, until 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 agreement with Dr. Reddy’s, we are required to (i) use commercially reasonable efforts to make commercially available products in the CTCL indication, (ii) initiate two investigator initiated immuno-oncology trials (which we initiated in June 2021 and September 2022, respectively), (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.

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Common Stock, Stock Options and Warrants

9 Months Ended

Jun. 30, 2023

Common Stock, Stock Options and Warrants [Abstract]

COMMON STOCK, STOCK OPTIONS AND WARRANTS

4. COMMON STOCK, STOCK OPTIONS AND WARRANTS

Common Stock Issued for Services

On November 2, 2021, the Company issued 50,201 shares of common stock for investor relations services and expensed the $95,884 fair value of the common stock issued.

On March 21, 2022, the Company issued 100,000 shares of common stock for media, public and investor relations services and expensed the $178,000 fair value of the common stock issued.

On September 13, 2022, the Company issued 81,500 shares of common stock for media, public and investor relations services and expensed the $104,320 fair value of the common stock issued.

On March 27, 2023, the Company issued 100,000 shares of common stock for media, public and investor relations services and expensed the $102,000 fair value of the common stock issued.

Common Stock Offering

On May 8, 2023, the Company closed a registered direct offering of 12,500,001 common shares and warrants to purchase up to 12,500,001 common shares, at a purchase price of $1.20 per share and accompanying warrant for gross proceeds of $15,000,001. The warrants have an exercise price of $1.50 per share, are exercisable six months from the date of issuance, and expire five years from the date of issuance. The estimated fair value of the warrants issued to the investors was approximately $11,000,000.

Net proceeds were $13,798,870 after deducting the placement agent fee of $1,050,000, placement agent expenses of $85,000, legal fees of $50,181, and other offering expenses of $15,950. The Company also issued 875,000 warrants to the placement agent at an exercise price of $1.50 per share, that are exercisable six months from the date of issuance, and expire five years from the date of issuance. The estimated fair value of the warrants issued to the placement agent was approximately $771,000.

Stock Option Plans

Under our 2014 Stock Incentive Plan, we reserved 866,667 common shares for issuance to employees, directors, and consultants. As of June 30, 2023, options to purchase 795,171 shares were outstanding and no shares remain available for future grants.

Under our 2018 Omnibus Stock Incentive Plan, we reserved 2,000,000 common shares for issuance to employees, directors, and consultants. As of June 30, 2023, options to purchase 1,760,000 shares were outstanding and no shares remain available for future grants.

Under our 2020 Omnibus Stock Incentive Plan, we reserved 3,110,000 common shares for issuance to employees, directors, and consultants. As of June 30, 2023, options to purchase 1,820,000 shares were outstanding, options to purchase 50,000 shares were forfeited, and the remaining 1,240,000 shares were transferred to the 2021 Omnibus Stock Incentive Plan (“2021 Stock Plan”).

Under our 2021 Omnibus Stock Incentive Plan, we reserved 8,740,000 shares for issuance to employees, directors, and consultants through options, SARs, dividend equivalent rights, restricted stock, restricted stock units, or other rights. As of June 30, 2023, options to purchase 8,705,000 shares were outstanding and the remaining 35,000 shares were transferred to the 2023 Omnibus Stock Incentive Plan (the “2023 Stock Plan”).

In November 2022, our Board approved the Citius Pharmaceuticals, Inc. 2023 Stock Plan, subject to stockholder approval, which was received on February 7, 2023. The 2023 Stock Plan has reserved for issuance 12,035,000 shares of our common stock. As of June 30, 2023, options to purchase 300,000 shares were outstanding under the 2023 Stock Plan and 11,735,000 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. 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 2020 Omnibus Stock Incentive Plan) is presented below:

	Option Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at October 1, 2022		9,400,171		$	2.07	7.81 years	$	869,509
Granted		4,150,000			1.26
Exercised		(46,667	)		0.67			34,067
Forfeited or expired		(123,333	)		5.52
Outstanding at June 30, 2023		13,380,171		$	1.79	7.78 years	$	815,287
Exercisable at June 30, 2023		6,200,170		$	2.09	6.57 years	$	747,453

On October 4, 2022, the Board of Directors granted options to purchase 3,375,000 shares to employees, 375,000 shares to directors and 50,000 shares to a consultant at $1.25 per share. On November 8, 2022, the Board of Directors granted options to purchase 50,000 shares to a consultant at $1.04 per share. On February 7, 2023, the Board of Directors granted options to purchase 150,000 shares to an employee and 75,000 shares to a director at $1.42 per share. On April 10, 2023, the Board of Directors granted options to purchase 75,000 shares to an employee at $1.46 per share. The weighted average grant date fair value of the options granted during the nine months ended June 30, 2023 was estimated at $0.98 per share. These options vest over terms of 12 to 36 months and have a term of 10 years.

On October 11, 2021, the Board of Directors granted options to purchase 2,515,000 shares to employees, 375,000 shares to directors and 175,000 shares to consultants at $2.04 per share. On November 1, 2021, the Board of Directors granted options to purchase 200,000 shares to an employee at $1.87 per share. During January and February 2022, options to purchase 300,000 shares were granted to three new employees at exercise prices ranging from $1.44 to $1.49 per share. In April and June 2022, options to purchase 80,000 shares were granted to two new employees at exercise prices ranging from $0.90 to $1.47 per share. The weighted average grant date fair value of the options granted during the nine months ended June 30, 2022 was estimated at $1.67 per share. These options vest over terms of 12 to 36 months and have a term of 10 years.

Stock-based compensation expense for the three months ended June 30, 2023 and 2022 was $1,174,111 (including $31,858 for the NoveCite Stock Plan) and $1,003,677 (including $33,333 for the NoveCite Stock Plan), respectively. Stock-based compensation expense for the nine months ended June 30, 2023 and 2022 was $3,540,787 (including $98,524 for the NoveCite Stock Plan) and $2,929,279 (including $99,999 for the NoveCite Stock Plan), respectively.

At June 30, 2023, unrecognized total compensation cost related to unvested awards under the Citius stock plans of $5,925,203 is expected to be recognized over a weighted average period of 1.7 years.

NoveCite Stock Plan - Under the NoveCite Stock Plan, 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, 2023, there were options outstanding to purchase 1,911,500 common shares of NoveCite and 88,500 shares available for future grants.

As of June 30, 2023, NoveCite has options outstanding to purchase 1,911,500 common shares at a weighted average exercise price of $0.24 per share, of which 1,514,333 are exercisable. These options vest over 36 months and have a term of 10 years. The weighted average remaining contractual term of options outstanding under the NoveCite Stock Plan is 7.65 years. At June 30, 2023, unrecognized total compensation cost related to unvested awards under the NoveCite Stock Plan of $79,433 is expected to be recognized over a weighted average period of 0.8 years.

Citius Oncology Stock Plan - Under the Citius Oncology Stock Plan, adopted on April 29, 2023, we reserved 15,000,000 common shares of Citius Oncology for issuance. The Citius Oncology 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. On July 5, 2023, Citius Oncology granted options to purchase 12,550,000 common shares at an exercise price of $2.15 per share. These options vest over periods from 12 to 36 months and have a term of 10 years.

On July 25, 2023, Citius Oncology granted options to purchase an additional 200,000 common shares at an exercise price of $2.15 per share. These options vest over a period of 12 months and have a term of 10 years.

Warrants

As of June 30, 2023, we have reserved shares of common stock for the exercise of outstanding warrants as follows:

	Exercise price		Number		Expiration Date
March 2018 Registered Direct/Private Placement Investors	$	2.86		218,972	October 2, 2023
August 2018 Offering Investors		1.15		3,921,569	August 14, 2023
August 2018 Offering Agent		1.59		189,412	August 8, 2023
April 2019 Registered Direct/Private Placement Investors		1.42		1,294,498	April 5, 2024
April 2019 Registered Direct/Private Placement Agent		1.93		240,130	April 5, 2024
September 2019 Offering Investors		0.77		2,793,297	September 27, 2024
September 2019 Offering Underwriter		1.12		194,358	September 27, 2024
February 2020 Exercise Agreement Agent		1.28		138,886	August 19, 2025
May 2020 Registered Direct Offering Investors		1.00		1,670,588	November 18, 2025
May 2020 Registered Direct Offering Agent		1.33		155,647	May 14, 2025
August 2020 Underwriter		1.31		201,967	August 10, 2025
January 2021 Private Placement Investors		1.23		3,091,192	July 27, 2026
January 2021 Private Placement Agent		1.62		351,623	July 27, 2026
February 2021 Offering Investors		1.70		20,580,283	February 19, 2026
February 2021 Offering Agent		1.88		2,506,396	February 19, 2026
May 2023 Registered Direct Offering Investors		1.50		12,500,001	May 8, 2028
May 2023 Registered Direct Offering Agent		1.50		875,000	May 3, 2028
				50,923,819

At June 30, 2023, the weighted average remaining life of the outstanding warrants is 2.9 years, all warrants are exercisable except for the 13,375,001 warrants issued in the May 2023 Registered Direct Offering which become exercisable on November 8, 2023, and the aggregate intrinsic value of the warrants outstanding was $1,747,081.

Common Stock Reserved

A summary of common stock reserved for future issuances as of June 30, 2023 is as follows:

Stock plan options outstanding	13,380,171
Stock plan shares available for future grants	11,735,000
Warrants outstanding	50,923,819
Total	76,038,990

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Operating Lease

9 Months Ended

Jun. 30, 2023

Operating Lease [Abstract]

OPERATING LEASE

5. OPERATING LEASE

Effective July 1, 2019, Citius entered into a 76-month lease for office space in Cranford, NJ. Citius pays its 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 Company’s lease does not provide an implicit rate, the Company estimated the incremental borrowing rate in calculating the present value of the lease payments based on the remaining lease term as of the adoption date.

● 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.

The elements of lease expense are as follows: 

Lease cost	Nine Months Ended June 30, 2023			Nine Months Ended June 30, 2022
Operating lease cost	$	179,118		$	179,116
Variable lease cost		3,567			772
Total lease cost	$	182,685		$	179,888
Other information
Weighted-average remaining lease term - operating leases		2.3 Years			3.3 Years
Weighted-average discount rate - operating leases		8.0	%		8.0	%

Maturities of lease liabilities due under the Company’s non-cancellable leases as of June 30, 2023 is as follows:  

Year Ending September 30,	June 30, 2023
2023 (excluding the 9 months ended June 30, 2023)	$	61,952
2024		249,024
2025		253,883
2026		21,460
Total lease payments		586,319
Less: interest		(53,437	)
Present value of lease liabilities	$	532,882

Leases	Classification	June 30, 2023		September 30, 2022
Assets
Lease asset	Operating	$	503,817	$	646,074
Total lease assets		$	503,817	$	646,074
Liabilities
Current	Operating	$	212,871	$	196,989
Non-current	Operating		320,011		481,245
Total lease liabilities		$	532,882	$	678,234

Interest expense on the lease liability was $36,861 and $47,881 for the nine months ended June 30, 2023 and 2022, respectively.

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Gain on Sale of New Jersey Net Operating Losses

9 Months Ended

Jun. 30, 2023

Gain on Sale of New Jersey Net Operating Losses [Abstract]

GAIN ON SALE OF NEW JERSEY NET OPERATING LOSSES

6. GAIN ON SALE OF NEW JERSEY NET OPERATING LOSSES

The Company recognized a gain of $3,585,689 for the nine months ended June 30, 2023 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.

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Subsequent Events

9 Months Ended

Jun. 30, 2023

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

7. SUBSEQUENT EVENTS

On July 29, 2023 the Company received a Complete Response Letter, (“CRL”) from the FDA regarding the BLA seeking approval for Lymphir. The FDA has required Citius to incorporate enhanced product testing, and additional controls agreed to with the FDA during the market application review. Additionally, the FDA raised no concerns relating to the safety and efficacy clinical data package.

Remediation efforts related to the CRL are not expected to impact the Company’s 12-month cash runway.

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Accounting Policies, by Policy (Policies)

9 Months Ended

Jun. 30, 2023

Accounting Policies [Abstract]

Basis of Preparation

Basis of Preparation — The accompanying condensed consolidated financial statements include the operations of Citius Pharmaceuticals, Inc., and its wholly-owned subsidiaries, Citius Pharmaceuticals, LLC, LMB, and Citius Oncology (formerly Citius Acquisition, Inc.), and its majority-owned subsidiary NoveCite. Citius Oncology was inactive until April 1, 2022. 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, 2023, and the results of its operations and cash flows for the three and nine month periods ended June 30, 2023 and 2022. The operating results for the three- and nine-month periods ended June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending September 30, 2023. 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 year ended September 30, 2022 filed with the Securities and Exchange Commission (“SEC”).

Use of Estimates

Use of Estimates — Our accounting principles require our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting period. Estimates having relatively higher significance include the accounting for in-process research and development and goodwill impairment, stock-based compensation, valuation of warrants, 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 — 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

Recently Issued Accounting Standards

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Acquired Contract Assets and Contract Liabilities. Under the new guidance (ASC 805-20-30-28), the acquirer should determine what contract assets and/or contract liabilities it would have recorded under Accounting Standards Codification (“ASC”) 606 (the revenue guidance) as of the acquisition date, as if the acquirer had entered into the original contract at the same date and on the same terms as the acquiree. The recognition and measurement of those contract assets and contract liabilities will likely be comparable to what the acquiree has recorded on its books under ASC 606 as of the acquisition date. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. ASU 2021-08 is effective for the Company in the first quarter of fiscal year 2024. Early adoption is permitted, including in an interim period, for any period for which financial statements have not yet been issued. However, adoption in an interim period other than the first fiscal quarter requires an entity to apply the new guidance to all prior business combinations that have occurred since the beginning of the annual period in which the new guidance is adopted. The Company is currently evaluating the adoption date of ASU 2021-08 and the impact, if any, adoption will have on its financial position and results of operations.

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Common Stock, Stock Options and Warrants (Tables)

9 Months Ended

Jun. 30, 2023

Common Stock, Stock Options and Warrants [Abstract]

Schedule of Summary of Option Activity Under Our Stock Option Plans

A summary of option activity under our stock option plans (excluding the NoveCite 2020 Omnibus Stock Incentive Plan) is presented below:

	Option Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at October 1, 2022		9,400,171		$	2.07	7.81 years	$	869,509
Granted		4,150,000			1.26
Exercised		(46,667	)		0.67			34,067
Forfeited or expired		(123,333	)		5.52
Outstanding at June 30, 2023		13,380,171		$	1.79	7.78 years	$	815,287
Exercisable at June 30, 2023		6,200,170		$	2.09	6.57 years	$	747,453

Schedule of Reserved Shares of Common Stock for the Exercise of Outstanding Warrants

As of June 30, 2023, we have reserved shares of common stock for the exercise of outstanding warrants as follows:

	Exercise price		Number		Expiration Date
March 2018 Registered Direct/Private Placement Investors	$	2.86		218,972	October 2, 2023
August 2018 Offering Investors		1.15		3,921,569	August 14, 2023
August 2018 Offering Agent		1.59		189,412	August 8, 2023
April 2019 Registered Direct/Private Placement Investors		1.42		1,294,498	April 5, 2024
April 2019 Registered Direct/Private Placement Agent		1.93		240,130	April 5, 2024
September 2019 Offering Investors		0.77		2,793,297	September 27, 2024
September 2019 Offering Underwriter		1.12		194,358	September 27, 2024
February 2020 Exercise Agreement Agent		1.28		138,886	August 19, 2025
May 2020 Registered Direct Offering Investors		1.00		1,670,588	November 18, 2025
May 2020 Registered Direct Offering Agent		1.33		155,647	May 14, 2025
August 2020 Underwriter		1.31		201,967	August 10, 2025
January 2021 Private Placement Investors		1.23		3,091,192	July 27, 2026
January 2021 Private Placement Agent		1.62		351,623	July 27, 2026
February 2021 Offering Investors		1.70		20,580,283	February 19, 2026
February 2021 Offering Agent		1.88		2,506,396	February 19, 2026
May 2023 Registered Direct Offering Investors		1.50		12,500,001	May 8, 2028
May 2023 Registered Direct Offering Agent		1.50		875,000	May 3, 2028
				50,923,819

Schedule of Summary of Common Stock Reserved for Future Issuances

A summary of common stock reserved for future issuances as of June 30, 2023 is as follows:

Stock plan options outstanding	13,380,171
Stock plan shares available for future grants	11,735,000
Warrants outstanding	50,923,819
Total	76,038,990

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Operating Lease (Tables)

9 Months Ended

Jun. 30, 2023

Operating Lease [Abstract]

Schedule of Operating Lease Expense

The elements of lease expense are as follows:

Lease cost	Nine Months Ended June 30, 2023			Nine Months Ended June 30, 2022
Operating lease cost	$	179,118		$	179,116
Variable lease cost		3,567			772
Total lease cost	$	182,685		$	179,888
Other information
Weighted-average remaining lease term - operating leases		2.3 Years			3.3 Years
Weighted-average discount rate - operating leases		8.0	%		8.0	%

Schedule of Lease Liabilities

Maturities of lease liabilities due under the Company’s non-cancellable leases as of June 30, 2023 is as follows:

Year Ending September 30,	June 30, 2023
2023 (excluding the 9 months ended June 30, 2023)	$	61,952
2024		249,024
2025		253,883
2026		21,460
Total lease payments		586,319
Less: interest		(53,437	)
Present value of lease liabilities	$	532,882

Schedule of Operating Leases Assets and Liabilities

Leases	Classification	June 30, 2023		September 30, 2022
Assets
Lease asset	Operating	$	503,817	$	646,074
Total lease assets		$	503,817	$	646,074
Liabilities
Current	Operating	$	212,871	$	196,989
Non-current	Operating		320,011		481,245
Total lease liabilities		$	532,882	$	678,234

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Nature of Operations, Basis of Presentation and Summary of Significant Accounting Policies (Details) - USD ($)	9 Months Ended
	Jun. 30, 2023	Sep. 11, 2020
Nature of Operations, Basis of Presentation and Summary of Significant Accounting Policies (Details) [Line Items]
Shares owned (in Shares)	1,514,333	7,500,000
Acquisition value	$ 19,400,000
Revenue generation	40,000,000
Goodwill	$ 9,346,796
Delaware Corporation [Member]
Nature of Operations, Basis of Presentation and Summary of Significant Accounting Policies (Details) [Line Items]
Ownership, percentage		75.00%

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Liquidity and Management's Plan (Details)	9 Months Ended
	Jun. 30, 2023 USD ($)
Liquidity and Management
Negative cash flow operations	$ (22,259,997)
Working capital	$ 35,323,293

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Patent and Technology License Agreements (Details) - USD ($)		1 Months Ended		9 Months Ended			12 Months Ended
	Oct. 06, 2020	Jan. 31, 2023	Jan. 31, 2022	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2021	Sep. 30, 2021
Patent and Technology License Agreements (Details) [Line Items]
Annual maintenance fee					$ 90,000	$ 90,000
Royalty payment				$ 100,000
Increasing annual royalties				25,000
Maximum aggregate annual royalties				150,000
Payable amount to NAT				1,100,000
Maintenance fee		$ 75,000	$ 60,000
Milestone payments				$ 2,100,000
Agreement expiration date				Jan. 02, 2034
Developmental milestones payment				$ 51,000,000
Revenue percentage				50.00%
Extension fee				$ 10,000,000
Minimum [Member]
Patent and Technology License Agreements (Details) [Line Items]
Royalty payment				100,000
Maintenance fee				15,000
Maximum [Member]
Patent and Technology License Agreements (Details) [Line Items]
Royalty payment				25,000
Maintenance fee				$ 90,000
Novellus Inc [Member]
Patent and Technology License Agreements (Details) [Line Items]
Research and development expense	$ 5,000,000
Outstanding equity							25.00%
Percentage of outstanding equity							75.00%
Percentage of ownership additional shares							25.00%

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Common Stock, Stock Options and Warrants (Details) - USD ($)												1 Months Ended						3 Months Ended		9 Months Ended
	Jul. 05, 2023	May 08, 2023	Apr. 10, 2023	Apr. 01, 2023	Feb. 07, 2023	Nov. 08, 2022	Oct. 04, 2022	Sep. 13, 2022	Nov. 02, 2021	Nov. 01, 2021	Oct. 11, 2021	Jul. 25, 2023	Mar. 27, 2023	Jun. 30, 2022	Mar. 21, 2022	Feb. 28, 2022	Jan. 31, 2022	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Apr. 29, 2023	Sep. 11, 2020
Common Stock, Stock Options and Warrants (Details) [Line Items]
Issued shares									50,201				100,000		100,000
Fair value common stock issued (in Dollars)									$ 95,884				$ 102,000		$ 178,000
Direct offering		12,500,001
Purchase of warrants	12,550,000	12,500,001			75,000	50,000					375,000
Purchase price (in Dollars per share)		$ 1.2
Gross proceeds (in Dollars)		$ 15,000,001
Exercise price (in Dollars per share)		$ 1.5
Investors (in Dollars)		$ 11,000,000
Net proceeds (in Dollars)																				$ 13,798,870
Offering expense (in Dollars)																		$ 15,950		15,950
Warrants (in Dollars)																				$ 875,000
Warrant exercise price per share (in Dollars per share)																				$ 1.5
Placement agent (in Dollars)																				$ 771,000
Common stock issued																		2,000,000		2,000,000		15,000,000
Option to purchase share outstanding																		300,000		300,000
Shares available for future grants																				11,735,000
Stock Incentive Plan (in Dollars)																				$ 1,240,000
Remaining shares																		1,514,333		1,514,333			7,500,000
Contractual term																				10 years
Share price (in Dollars per share)	$ 2.15				$ 1.42	$ 1.04	$ 1.25			$ 1.87	$ 2.04							$ 0.98		$ 0.98
Purchase of grants			75,000
Employee			$1.46
Board of directors granted options to purchase shares										200,000
Options to purchase shares														80,000		300,000	300,000
Share issued price per share																					1.67
Stock-based compensation expense (in Dollars)																		$ 1,174,111	$ 33,333	$ 3,540,787	$ 98,524
Citius stock plans (in Dollars)																		$ 5,925,203		$ 5,925,203
Weighted average period term																				1 year 8 months 12 days
ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionOutstandingNumber																				1,911,500
Grants																				88,500
StockIssuedDuringPeriodSharesStockOptionExercised																				1,911,500
Weighted average exercise price (in Dollars per share)																		$ 0.24		$ 0.24
Unrecognized total compensation (in Dollars)																		$ 79,433		$ 79,433
Warrants outstanding (in Dollars)																		$ 1,747,081		$ 1,747,081
Common Stock [Member]
Common Stock, Stock Options and Warrants (Details) [Line Items]
Issued shares								81,500
Fair value common stock issued (in Dollars)								$ 104,320
Purchase of warrants							375,000
Directors [Member]
Common Stock, Stock Options and Warrants (Details) [Line Items]
Purchase of warrants							50,000				175,000
Warrants [Member]
Common Stock, Stock Options and Warrants (Details) [Line Items]
Weighted average remaining life of the outstanding warrants																		2 years 10 months 24 days		2 years 10 months 24 days
Aggregate intrinsic value for the warrants outstanding (in Dollars)																				$ 13,375,001
Minimum [Member]
Common Stock, Stock Options and Warrants (Details) [Line Items]
Share price (in Dollars per share)																$ 1.44
Exercise price range (in Dollars per share)																		$ 0.9		$ 0.9
Maximum [Member]
Common Stock, Stock Options and Warrants (Details) [Line Items]
Share price (in Dollars per share)																$ 1.49
Exercise price range (in Dollars per share)																		$ 1.47		$ 1.47
Placement agent fee [Member]
Common Stock, Stock Options and Warrants (Details) [Line Items]
Expenses (in Dollars)																				$ 1,050,000
Agent fees [Member]
Common Stock, Stock Options and Warrants (Details) [Line Items]
Expenses (in Dollars)																				85,000
Legal fee [Member]
Common Stock, Stock Options and Warrants (Details) [Line Items]
Expenses (in Dollars)																				$ 50,181
Subsequent Event [Member]
Common Stock, Stock Options and Warrants (Details) [Line Items]
Additional purchase shares												200,000
Grant exercise price (in Dollars per share)												$ 2.15
Options vest period												12 months
Subsequent Event [Member] | Citius Oncology Stock Plan [Member]
Common Stock, Stock Options and Warrants (Details) [Line Items]
Options vest period												10 years
Board of Directors [Member]
Common Stock, Stock Options and Warrants (Details) [Line Items]
Purchase of warrants					150,000		3,375,000				2,515,000
2014 Stock Incentive Plan [Member]
Common Stock, Stock Options and Warrants (Details) [Line Items]
Common stock for issuance																		866,667		866,667
Shares outstanding																		795,171		795,171
2018 Omnibus Stock Incentive Plan [Member]
Common Stock, Stock Options and Warrants (Details) [Line Items]
Common stock for issuance																		2,000,000		2,000,000
Number of shares outstanding																		1,760,000		1,760,000
2020 Plan [Member]
Common Stock, Stock Options and Warrants (Details) [Line Items]
Common stock issued																		3,110,000		3,110,000
Option to purchase share outstanding																		8,705,000		8,705,000
Remaining shares																		35,000		35,000
2021 Stock Plan [Member]
Common Stock, Stock Options and Warrants (Details) [Line Items]
Option to purchase share outstanding																		1,820,000		1,820,000
Shares available for future grants																				50,000
Shares for issuance to employee reserved																		8,740,000		8,740,000
2023 Stock Plan [Member]
Common Stock, Stock Options and Warrants (Details) [Line Items]
Common stock issued																		12,035,000		12,035,000
NoveCite Stock Plan [Member]
Common Stock, Stock Options and Warrants (Details) [Line Items]
Stock-based compensation expense (in Dollars)				$ 31,858															$ 1,003,677	$ 2,929,279	$ 99,999

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Common Stock, Stock Options and Warrants (Details) - Schedule of Summary of Option Activity Under Our Stock Option Plans	9 Months Ended
	Jun. 30, 2023 USD ($) $ / shares shares
Schedule of Summary of Option Activity Under Our Stock Option Plans [Abstract]
Option Shares at beginning | shares	9,400,171
Outstanding Weighted- Average Exercise Price at beginning | $ / shares	$ 2.07
Outstanding Weighted- Average Remaining Contractual Term at beginning	7 years 9 months 21 days
Outstanding Aggregate Intrinsic Value at beginning | $	$ 869,509
Granted Shares | shares	4,150,000
Granted Weighted- Average Exercise Price | $ / shares	$ 1.26
Option Shares , Exercised | shares	(46,667)
Exercised , Weighted- Average Exercise Price | $ / shares	$ 0.67
Exercised Aggregate Intrinsic Value | $	$ 34,067
Forfeited or expired Shares | shares	(123,333)
Forfeited or expired Weighted- Average Exercise Price | $ / shares	$ 5.52
Option Shares at ending | shares	13,380,171
Outstanding Weighted- Average Exercise Price at ending | $ / shares	$ 1.79
Outstanding Weighted- Average Remaining Contractual Term at ending	7 years 9 months 10 days
Outstanding Aggregate Intrinsic Value at ending | $	$ 815,287
Exercisable Shares | shares	6,200,170
Exercisable Weighted- Average Exercise Price | $ / shares	$ 2.09
Exercisable Weighted- Average Remaining Contractual Term	6 years 6 months 25 days
Exercisable Aggregate Intrinsic Value | $	$ 747,453

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Common Stock, Stock Options and Warrants (Details) - Schedule of Reserved Shares of Common Stock for the Exercise of Outstanding Warrants	9 Months Ended
	Jun. 30, 2023 $ / shares shares
Class of Warrant or Right [Line Items]
Number	50,923,819
March 2018 Registered Direct/Private Placement Investors [Member]
Class of Warrant or Right [Line Items]
Exercise price (in Dollars per share) | $ / shares	$ 2.86
Number	218,972
Expiration Dates	October 2, 2023
August 2018 Offering Investors [Member]
Class of Warrant or Right [Line Items]
Exercise price (in Dollars per share) | $ / shares	$ 1.15
Number	3,921,569
Expiration Dates	August 14, 2023
August 2018 Offering Agent [Member]
Class of Warrant or Right [Line Items]
Exercise price (in Dollars per share) | $ / shares	$ 1.59
Number	189,412
Expiration Dates	August 8, 2023
April 2019 Registered Direct/Private Placement Investors [Member]
Class of Warrant or Right [Line Items]
Exercise price (in Dollars per share) | $ / shares	$ 1.42
Number	1,294,498
Expiration Dates	April 5, 2024
April 2019 Registered Direct/Private Placement Agent [Member]
Class of Warrant or Right [Line Items]
Exercise price (in Dollars per share) | $ / shares	$ 1.93
Number	240,130
Expiration Dates	April 5, 2024
September 2019 Offering Investors [Member]
Class of Warrant or Right [Line Items]
Exercise price (in Dollars per share) | $ / shares	$ 0.77
Number	2,793,297
Expiration Dates	September 27, 2024
September 2019 Offering Underwriter [Member]
Class of Warrant or Right [Line Items]
Exercise price (in Dollars per share) | $ / shares	$ 1.12
Number	194,358
Expiration Dates	September 27, 2024
February 2020 Exercise Agreement Agent [Member]
Class of Warrant or Right [Line Items]
Exercise price (in Dollars per share) | $ / shares	$ 1.28
Number	138,886
Expiration Dates	August 19, 2025
May 2020 Registered Direct Offering Investors [Member]
Class of Warrant or Right [Line Items]
Exercise price (in Dollars per share) | $ / shares	$ 1
Number	1,670,588
Expiration Dates	November 18, 2025
May 2020 Registered Direct Offering Agent [Member]
Class of Warrant or Right [Line Items]
Exercise price (in Dollars per share) | $ / shares	$ 1.33
Number	155,647
Expiration Dates	May 14, 2025
August 2020 Underwriter [Member]
Class of Warrant or Right [Line Items]
Exercise price (in Dollars per share) | $ / shares	$ 1.31
Number	201,967
Expiration Dates	August 10, 2025
January 2021 Private Placement Investors [Member]
Class of Warrant or Right [Line Items]
Exercise price (in Dollars per share) | $ / shares	$ 1.23
Number	3,091,192
Expiration Dates	July 27, 2026
January 2021 Private Placement Agent [Member]
Class of Warrant or Right [Line Items]
Exercise price (in Dollars per share) | $ / shares	$ 1.62
Number	351,623
Expiration Dates	July 27, 2026
February 2021 Offering Investors [Member]
Class of Warrant or Right [Line Items]
Exercise price (in Dollars per share) | $ / shares	$ 1.7
Number	20,580,283
Expiration Dates	February 19, 2026
February 2021 Offering Agent[Member]
Class of Warrant or Right [Line Items]
Exercise price (in Dollars per share) | $ / shares	$ 1.88
Number	2,506,396
Expiration Dates	February 19, 2026
May 2023 Registered Direct Offering Investors [Member]
Class of Warrant or Right [Line Items]
Exercise price (in Dollars per share) | $ / shares	$ 1.5
Number	12,500,001
Expiration Dates	May 8, 2028
May 2023 Registered Direct Offering Agent [Member]
Class of Warrant or Right [Line Items]
Exercise price (in Dollars per share) | $ / shares	$ 1.5
Number	875,000
Expiration Dates	May 3, 2028

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Common Stock, Stock Options and Warrants (Details) - Schedule of Summary of Common Stock Reserved for Future Issuances	9 Months Ended
	Jun. 30, 2023 shares
Schedule of Summary of Common Stock Reserved For Future Issuances [Abstract]
Stock plan options outstanding	13,380,171
Stock plan shares available for future grants	11,735,000
Warrants outstanding	50,923,819
Total	76,038,990

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Operating Lease (Details) - USD ($)	9 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Operating Lease [Abstract]
Lease liability interest expenses	$ 36,861	$ 47,881

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Operating Lease (Details) - Schedule Operating Lease Expense - USD ($)	9 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Schedule operating lease expense [Abstract]
Operating lease cost	$ 179,118	$ 179,116
Variable lease cost	3,567	772
Total lease cost	$ 182,685	$ 179,888
Other information
Weighted-average remaining lease term - operating leases	2 years 3 months 18 days	3 years 3 months 18 days
Weighted-average discount rate - operating leases	8.00%	8.00%

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Operating Lease (Details) - Schedule of Lease Liabilities	Jun. 30, 2023 USD ($)
Schedule of lease liabilities due under the company’s non-cancellable leases [Abstract]
2023 (excluding the 9 months ended June 30, 2023)	$ 61,952
2024	249,024
2025	253,883
2026	21,460
Total lease payments	586,319
Less: interest	(53,437)
Present value of lease liabilities	$ 532,882

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Operating Lease (Details) - Schedule of Operating Leases Assets and Liabilities - USD ($)	Jun. 30, 2023	Sep. 30, 2022
Assets
Lease asset	$ 503,817	$ 646,074
Total lease assets	503,817	646,074
Liabilities
Current	212,871	196,989
Non-current	320,011	481,245
Total lease liabilities	$ 532,882	$ 678,234

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Gain on Sale of New Jersey Net Operating Losses (Details)	9 Months Ended
	Jun. 30, 2023 USD ($)
Gain on Sale of New Jersey Net Operating Losses [Abstract]
Recognized a gain	$ 3,585,689