Citius Pharmaceuticals 第二財季首

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

 

For the quarterly period ended: March 31, 2026

 

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 (§232.405
of this chapter) during the preceding 12 months (or for 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 May 14, 2026, there were 27,452,570 shares
of common stock, $0.001 par value, of the registrant issued and outstanding.

 

 

 

 

 
 

 

 

Citius Pharmaceuticals, Inc.

FORM 10-Q

 

TABLE OF CONTENTS

March 31, 2026 

 

 
  
  
 Page

 
 PART I. FINANCIAL INFORMATION:
 1

 
  
  
  

 
 Item 1.
 Financial Statements (Unaudited)
 1

 
  
 Condensed Consolidated Balance Sheets at  March 31, 2026 and September 30, 2025
 1

 
  
 Condensed Consolidated Statements of Operations for the Three and Six Months Ended March 31, 2026 and 2025
 2

 
  
 Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended March 31, 2026 and 2025
 3

 
  
 Condensed Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2026 and 2025
 4

 
  
 Notes to Condensed Consolidated Financial Statements
 5

 
 Item 2.
 Management’s Discussion and Analysis of Financial Condition and Results of Operations
 24

 
 Item 3.
 Quantitative and Qualitative Disclosures about Market Risk
 35

 
 Item 4.
 Controls and Procedures
 35

 
  
  
  

 
 PART II. OTHER INFORMATION
 36

 
  
  
  

 
 Item 1.
 Legal Proceedings
 36

 
 Item 1A.
 Risk Factors
 36

 
 Item 2.
 Unregistered Sales of Equity Securities and Use of Proceeds
 36

 
 Item 3.
 Defaults Upon Senior Securities
 36

 
 Item 4.
 Mine Safety Disclosures
 36

 
 Item 5.
 Other Information
 36

 
 Item 6.
 Exhibits
 37

 
  
  
  

 
  
 SIGNATURES
 38

 

 

 
i

 
 

 

 

EXPLANATORY NOTE

 

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

 

Mino-Lok® is our registered trademark and
LYMPHIRTM (denileukin diftitox) is a registered trademark of Citius Oncology. All other trade names, trademarks and service
marks appearing in this quarterly report are the property of their respective owners. We have assumed that the reader understands that
all such terms are source-indicating. Accordingly, such terms, when first mentioned in this report, appear with the trade name, trademark
or service mark notice and then throughout the remainder of this report without trade name, trademark or service mark notices for convenience
only and should not be construed as being used in a descriptive or generic sense.

 

 
ii

 
 

 

 

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 (the “SEC”). In addition, such statements could be affected by risks and uncertainties related to:

 

 
  
 ●
 our independent registered public accounting firm’s report includes an explanatory paragraph stating that there is substantial doubt about our ability to continue as a going concern;  

 
  
  
  

 
  
 ●
 our need for substantial additional funds and our ability to raise those funds;

 
  
  
  

 
  
 ●
 our ongoing evaluation of strategic alternatives;

 
  
  
  

 
  
 ●
 our ability to regain compliance with the continued listing requirements of the Nasdaq Stock Market LLC (“Nasdaq”);

 
  
  
  

 
  
 ●
 the ability of Citius Oncology to commercialize LYMPHIR, including covering the costs of licensing payments, product manufacturing and other third-party goods and services;

 
  
  
  

 
  
 ●
 our ability to recognize the anticipated benefits of the August 2024 reverse merger whereby Citius Oncology became a standalone publicly-traded company and our majority-owned subsidiary (the “Merger”), which may not be realized fully, if at all, or may take longer to realize than expected;

 
  
  
  

 
  
 ●
 our ability to obtain regulatory approval for and successfully commercialize Mino-Lok;

 
  
  
  

 
  
 ●
 the cost, timing, and results of our pre-clinical and clinical trials for our other product candidates;

 
  
  
  

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

 
  
  
  

 
  
 ●
 the estimated markets for LYMPHIR, Mino-Lok or any of our future product candidates and the acceptance thereof by any market;

 
  
  
  

 
  
 ●
 our ability to obtain, perform under and maintain financing and strategic agreements and relationships;

 
  
  
  

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

 
  
  
  

 
  
 ●
 our ability to recruit and retain qualified management 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 for the fiscal year ended September 30, 2025, filed with the SEC on December 23, 2025, as amended on January 28, 2026.

 

 

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.

 

 
iii

 
 

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

CITIUS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 
   
 March 31,  
 September 30, 

 
   
 2026  
 2025 

 
 ASSETS 
    
   

 
 Current Assets: 
    
   

 
 Cash and cash equivalents 
 $4,590,174  
 $4,252,290 

 
 Accounts receivable, net of allowances 
  1,079,055  
  -
 

 
 Inventory 
  22,659,590  
  22,286,693 

 
 Prepaid expenses 
  3,356,882  
  1,395,490 

 
 Total Current Assets 
  31,685,701  
  27,934,473 

 
   
     
    

 
 Operating lease right-of-use asset, net 
  794,518  
  818,694 

 
   
     
    

 
 Deposits 
  38,062  
  38,062 

 
 In-process research and development, net of accumulated amortization 
  90,506,250  
  92,800,000 

 
 Deferred financing costs 
  169,252  
  -
 

 
 Goodwill 
  9,346,796  
  9,346,796 

 
 Total Other Assets 
  100,060,360  
  102,184,858 

 
   
     
    

 
 Total Assets 
 $132,540,579  
 $130,938,025 

 
   
     
    

 
 LIABILITIES AND STOCKHOLDERS’ EQUITY 
     
    

 
 Current Liabilities: 
     
    

 
 Accounts payable 
 $9,453,803  
 $13,693,692 

 
 License payable 
  17,650,000  
  22,650,000 

 
 Accrued expenses 
  24,138,264  
  4,190,253 

 
 Accrued compensation 
  3,602,007  
  3,292,447 

 
 Note payable 
  -
  
  1,000,000 

 
 Operating lease liability 
  171,495  
  88,348 

 
 Total Current Liabilities 
  55,015,569  
  44,914,740 

 
   
     
    

 
 Deferred tax liability 
  7,803,790  
  7,770,760 

 
 Operating lease liability – noncurrent 
  636,667  
  724,925 

 
 Total Liabilities 
  63,456,026  
  53,410,425 

 
   
     
    

 
 Commitments and Contingencies 
   
  
   
 

 
   
     
    

 
 Stockholders’ Equity: 
     
    

 
 Preferred stock - $0.001 par value; 10,000,000 shares authorized; no shares issued and outstanding 
  -
  
  -
 

 
 Common stock - $0.001 par value; 250,000,000 shares authorized; 22,376,427 and 18,067,744 shares issued and outstanding at March 31, 2026 and September 30, 2025, respectively 
  22,376  
  18,068 

 
 Additional paid-in capital 
  329,775,214  
  306,336,239 

 
 Accumulated deficit 
  (268,256,054) 
  (238,804,129)

 
 Total Citius Pharmaceuticals, Inc. Stockholders’ Equity 
  61,541,536  
  67,550,178 

 
 Non-controlling interest 
  7,543,017  
  9,977,422 

 
 Total Equity 
  69,084,553  
  77,527,600 

 
   
     
    

 
 Total Liabilities and Equity 
 $132,540,579  
 $130,938,025 

 

 

See notes to unaudited condensed consolidated financial
statements.

Reflects a 1-for-25 reverse stock split effective
November 25, 2024.

 

 
1

 
 

 

 

CITIUS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED MARCH 31,
2026 AND 2025

(Unaudited)

 

 
   
 Three Months Ended  
 Six Months Ended 

 
   
 March 31,  
 March 31,  
 March 31,  
 March 31, 

 
   
 2026  
 2025  
 2026  
 2025 

 
 Revenues 
 $1,667,298  
 $—
  
 $5,611,409  
 $—
 

 
 Cost of revenues 
  (328,878) 
  —
  
  (1,118,086) 
  —
 

 
 Gross Profit 
  1,338,420  
  —
  
  4,493,323  
  —
 

 
   
     
     
     
    

 
 Operating Expenses 
     
     
     
    

 
 Research and development 
  1,633,518  
  3,766,525  
  3,233,237  
  5,893,563 

 
 Amortization of in-process research and development 
  1,720,312  
  —
  
  2,293,750  
  —
 

 
 General and administrative 
  26,391,101  
  4,792,122  
  32,111,828  
  10,179,874 

 
 Stock-based compensation – general and administrative 
  3,788,275  
  2,702,031  
  8,068,502  
  5,226,855 

 
 Total Operating Expenses 
  33,533,206  
  11,260,678  
  45,707,317  
  21,300,292 

 
   
     
     
     
    

 
 Operating Loss 
  (32,194,786) 
  (11,260,678) 
  (41,213,994) 
  (21,300,292)

 
   
     
     
     
    

 
 Other Income (Expense) 
     
     
     
    

 
 Interest income 
  53,584  
  13,413  
  98,681  
  36,021 

 
 Gain on sale of New Jersey net operating losses 
  3,833,277  
  —
  
  3,833,277  
  —
 

 
 Interest expense 
  (33,031) 
  —
  
  (188,569) 
  —
 

 
 Total Other Income, Net 
  3,853,830  
  13,413  
  3,743,389  
  36,021 

 
   
     
     
     
    

 
 Loss before Income Taxes 
  (28,340,956) 
  (11,247,265) 
  (37,470,605) 
  (21,264,271)

 
 Income tax expense (benefit) 
  (231,210) 
  264,240  
  33,030  
  528,480 

 
   
     
     
     
    

 
 Net Loss 
  (28,109,746) 
  (11,511,505) 
  (37,503,635) 
  (21,792,751)

 
 Net loss attributable to non-controlling interest 
  6,878,606  
  595,000  
  8,051,710  
  1,108,000 

 
   
     
     
     
    

 
 Net loss applicable to common stockholders 
 $(21,231,140) 
 $(10,916,505) 
 $(29,451,925) 
 $(20,684,751)

 
   
     
     
     
    

 
 Net Loss Per Share - Basic and Diluted 
 $(0.95) 
 $(1.27) 
 $(1.34) 
 $(2.58)

 
   
     
     
     
    

 
 Weighted Average Common Shares Outstanding 
     
     
     
    

 
 Basic and diluted (includes pre-funded warrants from the October 2025 offering) 
  22,376,427  
  8,581,207  
  21,931,009  
  8,029,834 

 

 

See notes to unaudited condensed consolidated financial
statements.

Reflects a 1-for-25 reverse stock split effective
November 25, 2024.

 

 
2

 
 

 

 

CITIUS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS’ EQUITY

FOR THE THREE AND SIX MONTHS ENDED MARCH 31,
2026 AND 2025

(Unaudited)

 

 
   
 Preferred  
 Common Stock  
 Additional Paid-In  
 Accumulated  
 Total Citius
 Pharmaceuticals,
 Inc.
 Stockholders’  
 Non- Controlling  
 Total 

 
   
 Stock  
 Shares  
 Amount  
 Capital  
 Deficit  
 Equity  
 Interest  
 Equity 

 
 Balance, September 30, 2025 
  -
  
  18,067,744  
 $18,068  
 $306,336,239  
 $(238,804,129) 
 $67,550,178  
 $9,977,422  
 $77,527,600 

 
 Issuance of common stock, net of costs of $13,042 
  -
  
  252,137  
  252  
  349,002  
  -
  
  349,254  
  -
  
  349,254 

 
 October 2025 sale of common stock and pre-funded warrants, net of costs of $75,868 
  -
  
  1,460,000  
  1,460  
  5,401,471  
  -
  
  5,402,931  
  -
  
  5,402,931 

 
 December 2025 sale of common stock and pre-funded warrants by Citius Oncology, net of costs of $2,872,989 
  -
  
  -  
  -
  
  11,258,682  
  -
  
  11,258,682  
  3,866,807  
  15,125,489 

 
 Issuance of common stock upon exercise of pre-funded warrants 
  -
  
  2,513,510  
  2,513  
  (2,262) 
  -
  
  251  
  -
  
  251 

 
 Issuance of common stock for services 
     
  83,036  
  83  
  107,427  
  -
  
  107,510  
  --
  
  107,510 

 
 Issuance of common stock warrant for note payable extension 
     
  -  
  -
  
  68,597  
  -
  
  68,597  
  -
  
  68,597 

 
 Stock-based compensation expense 
  -
  
  -  
  -
  
  3,441,544  
  -
  
  3,441,544  
  838,683  
  4,280,227 

 
 Net loss 
  -
  
  -  
  -
  
  -
  
  (9,393,889) 
  (9,393,889) 
  -
  
  (9,393,889)

 
 Net loss attributable to non-controlling interest 
  -  
  -  
  -
  
  -
  
  1,173,104  
  1,173,104  
  (1,173,104) 
  -
 

 
 Balance, December 31, 2025 
  -
  
  22,376,427  
  22,376  
  326,960,700  
  (247,024,914) 
  79,958,162  
  13,509,808  
  93,467,970 

 
 Proceeds from exercise of Citius Oncology pre-funded warrants 
  -
  
  -  
  -
  
  818  
  -
  
  818  
  -
  
  818 

 
 December 2025 offering costs 
  -
  
  -  
  -
  
  (62,764) 
  -
  
  (62,764) 
  -
  
  (62,764)

 
 Stock-based compensation expense 
  -
  
  -  
  -
  
  2,876,460  
  -
  
  2,876,460  
  911,815  
  3,788,275 

 
 Net loss 
  -
  
  -  
  -
  
  -
  
  (28,109,746) 
  (28,109,746) 
  -
  
  (28,109,746)

 
 Net loss attributable to non-controlling interest 
  -  
  -  
  -
  
  -
  
  6,878,606  
  6,878,606  
  (6,878,606) 
  - 

 
 Balance March 31, 2026 
              -
  
  22,376,427  
 $22,376  
 $329,775,214  
 $(268,256,054) 
 $61,541,536  
 $7,543,017  
 $69,084,553 

 
   
     
     
     
     
     
     
     
    

 
 Balance, September 30, 2024 
  -
  
  7,247,243  
 $7,247  
 $271,440,421  
 $(201,370,218) 
 $70,077,450  
 $4,024,380  
 $74,101,830 

 
 Sale of common stock, net of costs of $425,949 
  -
  
  480,000  
  480  
  2,573,571  
  -
  
  2,574,051  
  -
  
  2,574,051 

 
 Stock-based compensation expense 
  -
  
  -  
  -
  
  2,524,824  
  -
  
  2,524,824  
  -
  
  2,524,824 

 
 Net loss 
  -
  
  -  
  -
  
  -
  
  (10,281,246) 
  (10,281,246) 
  -
  
  (10,281,246)

 
 Net loss attributable to non-controlling interest 
  -  
  -  
  -
  
  -
  
  513,000  
  513,000  
  (513,000) 
  -
 

 
 Balance, December 31, 2024 
  -
  
  7,727,243  
  7,727  
  276,538,816  
  (211,138,464) 
  65,408,079  
  3,511,380  
  68,919,459 

 
 Issuance of common stock, net of costs 
  -
  
  1,033,406  
  1,034  
  3,464,773  
  -
  
  3,465,807  
  -
  
  3,465,807 

 
 Stock-based compensation expense 
  -
  
  -  
  -
  
  2,702,031  
  -
  
  2,702,031  
  -
  
  2,702,031 

 
 Net loss 
  -
  
  -  
  -
  
  -
  
  (11,511,505) 
  (11,511,505) 
     
  (11,511,505)

 
 Net loss attributable to non-controlling interest 
  -  
  -  
  -
  
  -
  
  595,000  
  595,000  
  (595,000) 
  -
 

 
 Balance, March 31, 2025 
  -  
  8,760,649  
 $8,761  
 $282,705,620  
 $(222,054,969) 
 $60,659,412  
 $2,916,380  
 $63,575,792 

 

 

See notes to unaudited condensed consolidated financial
statements.

Reflects a 1-for-25 reverse stock split effective
November 25, 2024.

 

 
3

 
 

 

 

CITIUS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED MARCH 31, 2026 AND
2025

(Unaudited)

 

 
   
 2026  
 2025 

 
 Cash Flows From Operating Activities: 
    
   

 
 Net loss 
 $(37,503,635) 
 $(21,792,751)

 
 Adjustments to reconcile net loss to net cash used in operating activities: 
     
    

 
 Stock-based compensation expense 
  8,068,502  
  5,226,855 

 
 Issuance of common stock for services 
  107,510  
  -
 

 
 Issuance of common stock warrant 
  68,597  
  -
 

 
 Amortization of in-process research and development 
  2,293,750  
  -
 

 
 Amortization (accretion) of operating lease right-of-use asset 
  24,176  
  110,845 

 
 Deferred income tax expense 
  33,030  
  528,480 

 
 Changes in operating assets and liabilities: 
     
    

 
 Accounts receivable, net of allowances 
  (1,079,055) 
  -
 

 
 Inventory 
  (372,897) 
  (7,070,487)

 
 Prepaid expenses 
  (1,961,392) 
  (308,791)

 
 Accounts payable 
  (4,239,889) 
  4,441,023 

 
 Accrued expenses 
  19,948,011  
  8,762,217 

 
 Accrued compensation 
  309,560  
  955,048 

 
 Operating lease liability 
  (5,111) 
  (117,767)

 
 Net Cash Used In Operating Activities 
  (14,308,843) 
  (9,265,328)

 
   
     
    

 
 Cash Flows From Investing Activities: 
     
    

 
 License fee payments 
  (5,000,000) 
  —
 

 
 Net Cash Used in Investing Activities 
  (5,000,000) 
  —
 

 
   
     
    

 
 Cash Flows From Financing Activities: 
     
    

 
 Repayment of note payable 
  (1,000,000) 
  —
 

 
 Deferred financing costs 
  (169,252) 
  —
 

 
 Proceeds from exercise of Citius Oncology pre-funded warrants 
  818  
  —
 

 
 Net proceeds from common stock offerings 
  20,815,161  
  6,039,858 

 
 Net Cash Provided By Financing Activities 
  19,646,727  
  6,039,858 

 
   
     
    

 
 Net Change in Cash and Cash Equivalents 
  337,884  
  (3,225,470)

 
 Cash and Cash Equivalents - Beginning of Period 
  4,252,290  
  3,251,880 

 
 Cash and Cash Equivalents - End of Period 
 $4,590,174  
 $26,410 

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

 
 Interest paid 
 $105,310  
 $—
 

 
 Operating lease right-of-use asset and liability recorded 
 $—
  
 $786,697 

 

 

See notes to unaudited condensed consolidated financial
statements.

 

 
4

 
 

 

 

CITIUS PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED MARCH 31, 2026 AND
2025

(Unaudited)

 

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

 

Business

 

Citius Pharmaceuticals, Inc. (“Citius Pharma,”
and together with its subsidiaries, the “Company”, “we” or “us”) is a late-stage biopharmaceutical
company dedicated to the development and commercialization of first-in-class critical care products with a focus on oncology, anti-infectives
in adjunct cancer care, unique prescription products and stem cell therapies.

 

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

 

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

 

On August 23, 2021, we formed Citius Oncology,
Inc. (“Citius Oncology”), as a wholly-owned subsidiary in conjunction with the acquisition of LYMPHIR, which began operations
in April 2022. On August 12, 2024, Citius Pharma and Citius Oncology entered into a merger agreement with TenX Keane Acquisition, and
its wholly owned subsidiary, TenX Merger Sub Inc (“Merger Sub”), whereby Merger Sub merged with and into Citius Oncology.
After the merger and recapitalization (the “Merger”), the newly combined publicly traded company was owned 92.3% by Citius
Pharma, and is named “Citius Oncology, Inc.” (Nasdaq: CTOR). As of March 31, 2026, Citius Pharma owned approximately 71% of
Citius Oncology.

 

Since our inception, we have devoted substantially
all our efforts to business planning, research and development, recruiting management and technical staff, and raising capital. We are
subject to a number of risks common to companies in the pharmaceutical industry including, but not limited to, the Company’s ability
to obtain additional financing, risks related to the development by the Company or its competitors of research and development stage products,
regulatory approval and market acceptance of its products, competition from larger companies, dependence on key personnel, dependence
on key suppliers and strategic partners and the Company’s compliance with governmental and other regulations.

 

Basis of Presentation and Summary of Significant
Accounting Policies

 

Basis of Preparation - The accompanying
unaudited condensed consolidated financial statements include the operations of Citius Pharmaceuticals, Inc., its wholly-owned subsidiary
LMB and its majority-owned subsidiaries NoveCite and Citius Oncology. On August 12, 2024, Citius Oncology, previously a wholly-owned subsidiary,
became a majority-owned subsidiary. As of March 31, 2026, Citius Oncology was approximately a 71% majority-owned subsidiary.

 

The operations of NoveCite and Citius Oncology
are included in the consolidated results. The portion of equity that is not attributable to the Company is presented as a non-controlling
interest within stockholders’ equity. Unless excluded by shareholder agreements, the portion of net loss attributable to non-controlling
interests is included in the statement of operations. All significant inter-company balances and transactions have been eliminated in
consolidation.

 

 
5

 
 

 

 

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 March 31, 2026, and the results of its operations and cash flows for the three and six months
ended March 31, 2026 and 2025. The operating results for the three and six months ended March 31, 2026 are not necessarily indicative
of the results that may be expected for the year ending September 30, 2026. These unaudited condensed consolidated financial statements
should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual
Report on Form 10-K for the fiscal year ended September 30, 2025 filed with the Securities and Exchange Commission (“SEC”)
on December 23, 2025, as amended on January 28, 2026.

 

Use of Estimates - The process of preparing
financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”)
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period.
Estimates having relatively higher significance include the accounting for revenue recognition, in-process research and development, stock-based
compensation, net realizable value of inventory 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, with pre-funded warrants being included in the loss per share.

 

Recently Issued Accounting Standards 

 

Other than as disclosed in our Form 10-K, we are
not aware of any other recently issued accounting standards not yet adopted that may have a material impact on our financial statements.

 

2. GOING CONCERN UNCERTAINTY AND MANAGEMENT’S
PLAN

 

The accompanying unaudited 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. We incurred a net loss of $37,503,635 for the six months ended March 31, 2026. The Company experienced
negative cash flows from operations of $14,308,843 for the six months ended March 31, 2026. At March 31, 2026, the Company had $4,590,174
in cash and a negative working capital of approximately $23.3 million.

 

On April 24, 2026, Citius Pharma closed a
registered direct offering for the sale of 5,076,143 shares of common stock (or pre-funded warrants in lieu thereof) at a purchase price
of $0.985 per share (or pre-funded warrant in lieu thereof). Gross proceeds were approximately $5.0 million, before deducting the placement
agent fees and expenses (See Note 13).

 

On May 5, 2026, Citius Oncology received gross
proceeds of approximately $11.5 million from the inducement exercise of certain warrants (See Note 13).

 

In addition, Citius Oncology entered
into a loan agreement for up to $25.0 million, with $10.0 million funded on May 6, 2026, up to $7.0 million available on the later of
(A) the date on which certain net revenue and liquidity milestones are achieved and (B) October 1, 2026, and continuing through December
31, 2026, and up to $8.0 million available beginning on the later of (A) the date on which certain additional net revenue milestones are
achieved and (B) January 1, 2027, and continuing through March 31, 2027. The loans bear interest at the greater of the prime rate plus
6% or 12.75%. The loans are secured by an interest in all of Citius Oncology’s assets, including intellectual property, subject
to agreed exceptions. The maturity date of the loans is November 1, 2029 (See Note 13).

 

 
6

 
 

 

 

The Company estimates that its and Citius Oncology’s
collective available cash resources will be sufficient to fund our operations through November 2026. We will need to raise additional
capital in the future to support our operations beyond November 2026, which raises substantial doubt about the Company’s ability
to continue as a going concern within one year after the date that the accompanying consolidated financial statements are issued.

 

The Company is currently engaged in capital raising
initiatives, as well as separate capital raising initiatives through its approximately 71% owned subsidiary Citius Oncology, in an effort
to extend its cash runway. Citius Oncology also has retained Jefferies LLC as its exclusive financial advisor in evaluating strategic
alternatives aimed at maximizing shareholder value.

 

The Company has generated limited operating revenue,
which commenced in December 2025, and has principally raised capital through the issuance of debt and equity instruments to finance its
operations. However, the Company’s continued operations beyond November 2026, including its development plans for Mino-Lok, Halo-Lido
and NoveCite, will depend on its ability to obtain regulatory approval for Mino-Lok and generate substantial revenue from the sale of
LYMPHIR and on its ability to raise additional capital through various potential sources, such as equity and/or debt financings, strategic
relationships, or out-licensing of its product candidates. However, the Company can provide no assurances on regulatory approval, commercialization,
or future sales of LYMPHIR or that financing or strategic relationships will be available on acceptable terms, or at all. If the Company
is unable to raise sufficient capital, find strategic partners or generate substantial revenue from the sale of LYMPHIR, there would be
a material adverse effect on its business. Further, the Company expects in the future to incur additional expenses as it continues to
develop its product candidates, including seeking regulatory approval, and protecting its intellectual property. The accompanying financial
statements do not include any adjustments that might result from the outcome of the above uncertainty.

 

3. REVENUE RECOGNITION AND ACCOUNTS RECEIVABLE

 

Revenue Recognition

 

We recognize revenue in accordance with the provisions
of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers. In determining the appropriate amount and timing
of revenue to be recognized under this guidance, we perform the following five steps: (i) identify the contract(s) with our customer;
(ii) identify the promised goods or services in the agreement and determine whether they are performance obligations, including whether
they are distinct in the context of the agreement; (iii) measure the transaction price, including the constraint on variable consideration;
(iv) allocate the transaction price to the performance obligations based on stand-alone selling prices; and (v) recognize revenue when
(or as) we satisfy each performance obligation. Revenues are recognized when control of the promised goods or services is transferred
to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

 

We distribute LYMPHIR in the U.S. through third
party specialty distributors who are our customers. The third-party specialty distributors subsequently resell our product to health care
providers, hospitals and infusion centers. Separately, we have or may enter into payment arrangements with various third-party’s
including government healthcare programs who provide coverage and or reimbursement for our product that have been prescribed to a patient.

         

Net Revenues

 

We recognize net revenue from LYMPHIR sales, net
of variable consideration and consideration payable to parties other than our customers consisting of estimates related to allowances
for sales returns, government chargebacks, patient coupon programs, and specialty distributor fees. Revenue is generally recognized when
the customer obtains control of the Company’s product, which occurs at a point in time, upon delivery based on the contractual shipping
terms of a contract.

 

We estimate variable consideration using the expected
value method, constrained to amounts for which it is probable that a significant reversal of cumulative revenue will not occur when uncertainties
are resolved. Calculating certain of these items involves estimates and judgments based on sales or invoice data, contractual terms, historical
or expected utilization rates, new information regarding changes in applicable regulations and guidelines that would impact the amount
of the actual allowance and our expectations regarding future utilization rates and channel inventory data. We will review the adequacy
of our provisions for all gross-to-net adjustments on a quarterly basis. Amounts reserved for these adjustments are made when trends or
significant events indicate that adjustment is appropriate reflecting actual experience.

 

 
7

 
 

 

 

The Company elected the practical expedient in
ASC 606-10-32-18 and does not assess whether a significant financing component exists for contracts in which payment is expected within
one year. No other practical expedients were applied.

  

Gross-to-Net Adjustments

 

Specialty Distributor Fees

 

We pay fees for distribution services, such as
fees for certain data that customers provide us. We expect our customers will earn these fees and accordingly deduct these fees from gross
product sales and accounts receivable at the time we recognize the related revenues.

 

Product Returns 

 

Customers have the right to return products if
they are damaged, defective, or expired, or as it is defined in their customer agreement. We have estimated product returns based on the
experience of similar products in the market, and will continue to estimate returns based on our actual returns, sales data, and inventory
levels in the distribution channel. These estimates are recorded as a reduction against gross product sales at the time of the sales.

 

Chargebacks 

 

Chargebacks will occur when federal agencies who
we contract with, or may contract with, can purchase off the Federal Supply Schedule or when Public Health Service 340B covered entities
purchase directly from our customers at discounted prices. Our customers then charge us the difference between their purchase price and
the discounted price. We estimate chargebacks considering the terms of the applicable arrangement and our visibility regarding utilization.
These chargebacks are recorded in the same period as the related revenue, as a reduction against gross product sales and accounts receivable.

 

Co-payment Assistance 

 

We offer co-payment assistance to patients with
commercial insurance that have coverage and are allowed such co-payment assistance. We estimate the average co-payment assistance amounts
for our products based on expected customer utilization and record any such amounts as a reduction from gross product revenue at the time
of sale. The Company has deposited the estimated co-pay assistance reflected and included in the gross-to-net adjustments.

 

 
   
 Three Months 

Ended  
 Six Months 

Ended 

 
   
 March 31, 

2026  
 March 31, 

2026 

 
   
    
   

 
 Gross Product Revenue 
 $2,003,760  
 $6,882,480 

 
 Gross-to-net adjustments: 
  336,462  
  1,271,071 

 
 Net Revenue 
 $1,667,298  
 $5,611,409 

 

 

Accounts receivable, net

 

Accounts receivable, net is stated at amounts
invoiced less allowances for distributor fees, chargebacks, and estimated returns. At March 31, 2026, these sales allowances totaled $837,585.
On a periodic basis, the Company evaluates its accounts receivable to establish an allowance for doubtful accounts. The allowance reflects
our current estimate of credit losses expected to occur over the life of the receivable. In developing our allowance for expected credit
losses, we use assumptions to capture the risk of loss, even if remote, based on a number of factors including existing contractual payment
terms, individual customer circumstances, historical payment patterns of our customers, a review of the local economic environment and
its potential impact on expected future customer payment patterns. Our collection risk is mitigated to a certain extent by the fact that
sales are collected in a reasonable period of time, allowing for the ability to reduce exposure on defaults if collection issues are identified.
We update our allowance as necessary to reflect expected credit losses over the remaining accounts receivable that are past due. We do
not currently expect our current or future exposures to credit losses to have a significant impact on us. The estimated allowance for
expected credit losses was $0 as of March 31, 2026.

 

 
8

 
 

 

  

4. INVENTORY

 

Inventory is stated at the lower of actual accumulated
costs or net realizable value related to the manufacturing of LYMPHIR commercial products, which became available for sale in December
2025. Cost is determined using the first-in, first-out (FIFO) method. No reserves against inventory were deemed necessary based on an
evaluation of the product expiration dating. A summary of inventory is as follows:

 

 
   
 March 31,
 2026  
 September 30,
 2025 

 
 Finished goods 
 $15,707,625  
 $10,577,876 

 
 Work in process 
  6,951,965  
  11,708,817 

 
 Total 
 $22,659,590  
 $22,286,693 

 

 

Cost of Goods Sold

 

Cost of goods sold consists of direct and indirect
costs associated with manufacturing and distributing LYMPHIR. These costs include amounts paid to third-party contract manufacturing organizations
for production-related services, including raw materials, drug substance, drug product manufacturing, fill-finish activities, certain
testing, and packaging. Cost of goods sold also includes distribution, storage shipping, and handling fees, as well as royalties owed
under the Company’s licensing arrangements.

 

5. PREPAID EXPENSES

 

Prepaid expenses include advance payments made
for the preparation of long-lead time drug substance and product costs, which will be utilized in research and development activities
or in the manufacturing of LYMPHIR for sales. Other prepaid expenses include insurance, FDA program fees, service fees and marketing costs.
A summary of prepaid expenses is as follows:

 

 
   
 March 31, 
 2026  
 September 30, 
 2025 

 
 Prepaid manufacturing 
 $2,531,280  
 $1,331,280 

 
 Prepaid insurance 
  304,495  
  -
 

 
 Prepaid annual FDA program fee 
  221,107  
  -
 

 
 Prepaid annual service fees 
  -
  
  64,210 

 
 Prepaid marketing costs 
  300,000  
  -
 

 
 Total 
 $3,356,882  
 $1,395,490 

 

 

 
9

 
 

 

 

6. IN-PROCESS RESEARCH AND DEVELOPMENT, NET

 

In process research and development consists of
a beginning carrying value for LYMPHIR of $73,400,000 and a net balance of $71,106,250 at March 31, 2026. Amortization of in-process research
and development commenced upon revenue generation in December 2025. For the three months ended March 31, 2026 and 2025, amortization was
$1,720,312 and $0, respectively. For the six months ended March 31, 2026 and 2025, amortization was $2,293,750 and $0, respectively. In-process
research and development for LYMPHIR is being amortized as follows on a straight-line basis over the remaining FDA product exclusivity
period which ends in August 2036. The amortization of in-process research and development excludes $19,400,000 associated with the acquisition
of LMB and the Mino-Lok product candidate which will begin amortization upon approval. A summary of the expected future amortization expense
for LYMPHIR in-process research and development is as follows:

 

 
 Year Ending September 30, 
 Amount 

 
 2026 (excluding the six months ended March 31,2026) 
 $3,440,625 

 
 2027 
  6,881,250 

 
 2028 
  6,881,250 

 
 2029 
  6,881,250 

 
 2030 
  6,881,250 

 
 2031 
  6,881,250 

 
 Thereafter 
  33,259,375 

 
 Total 
 $71,106,250 

 

 

7. PATENT AND TECHNOLOGY LICENSE AGREEMENTS

 

Patent and Technology License Agreement
– Mino-Lok

 

LMB has a patent and technology license agreement
with Novel Anti-Infective Therapeutics, Inc. (“NAT”) to develop and commercialize Mino-Lok® on an exclusive,
worldwide sub-licensable basis, as amended. LMB pays an annual maintenance fee each June until commercial sales of a product subject
to the license commence. The Company recorded an annual maintenance fee expense of $90,000 in both 2025 and 2024.

 

LMB will also pay annual royalties on net sales
of licensed products, with a low double digit royalty rate (within a range of 10% to 15%). In limited circumstances in which the licensed
product is not subject to a valid patent claim and a competitor is selling a competing product, the royalty rate is in the low- to mid-single
digits (within a range of 2% to 7%). After a commercial sale is obtained, LMB must pay minimum aggregate annual royalties of $100,000
in the first commercial year which is prorated for a less than 12-month period, increasing $25,000 per year to a maximum of $150,000 annually.
LMB must also pay NAT up to $1,100,000 upon achieving specified regulatory and sales milestones. Finally, LMB must pay NAT a specified
percentage of payments received from any sub-licensees.

 

Unless earlier terminated by NAT, based on the
failure to achieve certain development and commercial milestones, the license agreement remains in effect until the date that all patents
licensed under the agreement have expired and all patent applications within the licensed patent rights have been cancelled, withdrawn,
or expressly abandoned.

 

License Agreement with Eterna

 

On October 6, 2020, our subsidiary, NoveCite,
entered into a license agreement with Novellus Therapeutics Limited (“Novellus”), whereby NoveCite acquired an exclusive,
worldwide license, with the right to sublicense, develop and commercialize a stem cell therapy based on the Novellus’s patented
technology for the treatment of acute pneumonitis of any etiology in which inflammation is a major agent in humans. Upon execution of
the license agreement, we paid $5,000,000 to Novellus, which was charged to research and development expense during the year ended September
30, 2021, and issued to Novellus shares of NoveCite’s common stock representing 25% of the outstanding equity. We own the other
75% of NoveCite’s outstanding equity. Pursuant to the terms of the original stock subscription agreement, if NoveCite issued additional
equity, subject to certain exceptions, NoveCite had to maintain Novellus’s ownership at 25% by issuing additional shares to Novellus.

 

In July 2021, Novellus was acquired by Brooklyn
ImmunoTherapeutics, Inc. (“Brooklyn”). Pursuant to this transaction, the NoveCite license was assumed by Brooklyn with all
original terms and conditions. In connection with that transaction, the stock subscription agreement was amended to assign to Brooklyn
all of Novellus’s right, title, and interest in the stock subscription agreement and delete the anti-dilution protection and replace
it with a right of first refusal whereby Brooklyn will have the right to purchase all or a portion of the securities that NoveCite intends
to sell or in the alternative, at the option of NoveCite, Brooklyn may purchase that amount of the securities proposed to be sold by NoveCite
to allow Brooklyn to maintain its then percentage ownership. In October 2022, Brooklyn changed its name to Eterna Therapeutics Inc. (“Eterna”).

 

We are responsible for the operational activities
of NoveCite and bear all costs necessary to operate NoveCite. Our 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.

 

 
10

 
 

 

 

Eterna has no contractual rights in the profits
or obligations to share in the losses of NoveCite, and the Company has not allocated any losses to the noncontrolling interest.

 

Under the license agreement, NoveCite is obligated
to pay Eterna up to an aggregate of $51,000,000 in regulatory and developmental milestone payments. NoveCite also must pay a royalty equal
to a mid-teens percentage of net sales, commencing upon the first commercial sale of a licensed product. This royalty is subject to downward
adjustment on a product-by-product and country-by-country basis to a mid-single digit percentage (within a range of 4% to 8%) of net sales
in any country in the event of the expiration of the last valid patent claim or if no valid patent claim exists in that country. The royalty
will end on the earlier of (i) date on which a biosimilar product is first marketed, sold, or distributed by Eterna or any third party
in the applicable country or (ii) the 10-year anniversary of the date of expiration of the last-to-expire valid patent claim in that country.
In the case of a country where no licensed patent ever exists, the royalty will end on the later of (i) the date of expiry of such licensed
product’s regulatory exclusivity and (ii) the 10-year anniversary of the date of the first commercial sale of the licensed product
in the applicable country. In addition, NoveCite will pay to Eterna an amount equal to a mid-twenties percentage of any sublicensee fees
it receives.

 

Under the terms of the license agreement, in the
event that Eterna receives any revenue involving the original cell line included in the licensed technology, then Eterna shall remit to
NoveCite 50% of such revenue.

 

The term of the license agreement continues on
a country-by-country and licensed product-by-licensed product basis until the expiration of the last-to-expire royalty term. Either party
may terminate the license agreement upon written notice if the other party is in material default. NoveCite may terminate the license
agreement at any time without cause upon 90 days prior written notice.

 

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, we entered into an asset purchase
agreement with Dr. Reddy’s Laboratories SA, a subsidiary of Dr. Reddy’s Laboratories, Ltd. (collectively, “Dr. Reddy’s”)
and a license agreement with Eisai Co., Ltd. (“Eisai”) to acquire an exclusive license of E7777 (denileukin diftitox), an
oncology immunotherapy for the treatment of CTCL, a rare form of non-Hodgkin lymphoma. We renamed E7777 as I/ONTAK and also obtained the
trade name of LYMPHIRTM for the product. We assigned these agreements to Citius Oncology effective April 1, 2022 and we received
a Biologics License Application (“BLA”) approval from the FDA for LYMPHIR in August 2024.

 

Under the terms of these agreements, we acquired
Dr. Reddy’s exclusive license of E7777 from Eisai and other related assets owned by Dr. Reddy’s (which are now owned by Citius
Oncology). The exclusive license include rights to develop and commercialize E7777 in all markets except for Japan and certain parts of
Asia. Eisai retains exclusive development and marketing rights for the agent in Japan, China, Korea, Taiwan, Hong Kong, Macau, Indonesia,
Thailand, Malaysia, Brunei, Singapore, India, Pakistan, Sri Lanka, Philippines, Vietnam, Myanmar, Cambodia, Laos, Afghanistan, Bangladesh,
Bhutan, Nepal, Mongolia, and Papua New Guinea. We paid Dr. Reddy’s a $40 million upfront payment, which represents the acquisition
date fair value of the in-process research and development acquired from Dr. Reddy’s. Dr. Reddy’s is entitled to up to $40
million in development milestone payments related to CTCL approvals in the U.S. and other markets, up to $70 million in development milestones
for additional indications, as well as commercial milestone payments and low double-digit tiered royalties on net product sales (within
a range of 10% to 15%), and up to $300 million for commercial sales milestones. Citius Oncology also must pay on a fiscal quarter basis
tiered royalties equal to low double-digit percentages of net product sales (within a range of 10% to 15%). The royalties will end on
the earlier of (i) the 15-year anniversary of the first commercial sale of the latest indication that received regulatory approval in
the applicable country and (ii) the date on which a biosimilar product results in the reduction of net sales in the applicable product
by 50% in two consecutive quarters, as compared to the four quarters prior to the first commercial sale of the biosimilar product. Citius
Oncology will also pay to Dr. Reddy’s an amount equal to a low-thirties percentage of any sublicense upfront consideration or milestone
payments (or the like) rece