Citius Pharma(CTXR) - 2020 Q4 - Annual Report

PART I Business Overview Citius Pharmaceuticals, Inc. is a specialty pharmaceutical company developing and commercializing critical care products, including anti-infectives, cancer supportive care, and mesenchymal stem cell therapies, with four proprietary products addressing unmet medical needs - Company focuses on developing and commercializing critical care products, emphasizing anti-infectives, cancer supportive care, unique prescription products, and expanding into mesenchymal stem cell therapy[46] - The company expanded its product portfolio and technology platforms through the acquisition of Leonard-Meron Biosciences, Inc. (LMB) and the formation of NoveCite, Inc. (75% owned)[47] - Four proprietary products—Mino-Lok, Mino-Wrap, Halo-Lido, and NoveCite—are currently under development to address large, growing, and underserved market needs[48] Company Overview Citius Pharmaceuticals, Inc. is a New Jersey-based specialty pharmaceutical company focused on critical care products, including anti-infectives and stem cell therapies, developing Mino-Lok, Mino-Wrap, Halo-Lido, and NoveCite - Company focuses on developing and commercializing critical care products, emphasizing anti-infectives, cancer supportive care, unique prescription products, and expanding into mesenchymal stem cell therapy[46] - The company expanded its product portfolio and technology platforms through the acquisition of Leonard-Meron Biosciences, Inc. (LMB) and the formation of NoveCite, Inc. (75% owned)[47] - Four proprietary products—Mino-Lok, Mino-Wrap, Halo-Lido, and NoveCite—are currently under development to address large, growing, and underserved market needs[48] Mino-Lok Mino-Lok is a patented antibiotic lock solution for treating catheter-related bloodstream infections (CRBSI) and salvaging infected central venous catheters (CVCs), with a Phase 3 trial having FDA Fast Track designation and a revised endpoint - Mino-Lok is a proprietary solution containing minocycline, EDTA, and ethanol, working synergistically to treat and salvage infected central venous catheters (CVCs)[50] - A Phase 2b study demonstrated 100% efficacy in salvaging CVCs with no serious adverse events, outperforming the standard treatment of catheter removal and replacement[54][55] - The Phase 3 clinical trial received FDA Fast Track designation, and the primary efficacy endpoint was adjusted to "time to catheter failure," reducing the required patient sample size from 700 to approximately 144, with a 75% interim analysis expected by March 2021[61][67][70] Mino-Wrap Mino-Wrap is a minocycline and rifampin-containing liquefied gel dressing designed to reduce breast implant infections post-reconstruction, with an exclusive global license and FDA agreement on its preclinical development plan - Mino-Wrap is a liquefied gel-based dressing containing minocycline and rifampin, used to reduce tissue expander infections after breast reconstruction surgery[83] - The company has secured an exclusive global license from MDACC and plans to develop the product through the FDA's Investigational New Drug (IND) pathway[83] - The FDA has expressed general agreement with Mino-Wrap's preclinical plan and provided further guidance for the clinical program[83] Halo-Lido Halo-Lido is a topical formulation combining halobetasol propionate and lidocaine for hemorrhoid treatment, aiming for FDA approval via the 505(b)(2) pathway to secure three years of market exclusivity in an underserved market - Halo-Lido is a topical formulation of halobetasol propionate and lidocaine for hemorrhoid treatment, designed to provide anti-inflammatory and anesthetic relief[91][103] - Currently, there are no FDA-approved prescription hemorrhoid drugs in the US, with existing products often being DESI drugs or OTC, lacking rigorous clinical safety and efficacy data[91][105][107] - The company plans to seek approval through the FDA's 505(b)(2) pathway, potentially gaining three years of market exclusivity, which would provide a significant market advantage[108][129] NoveCite NoveCite is an iPSC-derived mesenchymal stem cell (iMSCs) therapy, exclusively licensed for Acute Respiratory Distress Syndrome (ARDS) treatment, including COVID-19-related ARDS, offering advantages over donor-derived MSCs - NoveCite is an iPSC (induced pluripotent stem cell)-derived mesenchymal stem cell (iMSCs) therapy aimed at treating Acute Respiratory Distress Syndrome (ARDS), including COVID-19-related ARDS[110] - NC-iMSCs are considered more effective than donor-derived MSCs, exhibiting higher levels of immunomodulatory protein secretion, an unlimited supply, single clonal production, and significantly greater expansion capabilities[111] - There are 3 million ARDS cases globally and approximately 200,000 in the US annually, with the COVID-19 pandemic significantly increasing case numbers, and currently no approved ARDS treatments exist[114] Sales and Marketing The company targets critical care and oncology markets influenced by key opinion leaders for controlled commercialization, planning partnerships with third-party pharmaceutical companies for broader product distribution - The company focuses on critical care and oncology markets, targeting those influenced by key opinion leaders and prescribed by a limited number of physicians, to achieve controllable commercialization and marketing synergies[115] - For products outside its core market scope, the company plans to collaborate with third-party pharmaceutical companies possessing large sales teams and marketing capabilities through licensing agreements[116] Intellectual Property The company protects intellectual property through patents, trade secrets, copyrights, and trademarks, with Mino-Lok's patent extended to 2036 and QIDP designation, Mino-Wrap patented until 2034, and NoveCite's technology exclusively licensed - Mino-Lok's original patent protection extends to 2024, but new stability patents (US Patent No. 10,086,114 and European Patent No. 3370794) extend intellectual property protection to 2036[121][122] - Mino-Lok received Qualified Infectious Disease Product (QIDP) designation, granting an additional five years of market exclusivity, which, combined with three years for new strength and formulation, could total eight years of market exclusivity[123] - Mino-Wrap's patent (US Patent No. 9,849,217) is protected until 2034; Halo-Lido plans to apply for new formulation patents and seek three years of market exclusivity via the 505(b)(2) pathway; NoveCite's iPSC-derived MSC technology is exclusively licensed globally[127][128][129][130] Competition The company operates in a competitive pharmaceutical industry, with Mino-Lok, Mino-Wrap, Halo-Lido, and NoveCite facing competition from existing treatments, OTC products, and other cell therapy developers - Mino-Lok's primary competition is the standard treatment of removing and replacing infected CVCs, as well as prophylactic lock solutions like CorMedix's Defencath, though Mino-Lok aims to salvage catheters[140][141][147] - Mino-Wrap's competition primarily comes from existing perioperative antimicrobial treatments involving implant soaking or surgical cavity irrigation[148] - If approved, Halo-Lido would be the only FDA-approved prescription hemorrhoid product on the market, with its main competition coming from over-the-counter (OTC) products[149] - NoveCite faces competition in the cell therapy sector from companies like Cynata Therapeutics, Athersys, Pluristem Therapeutics, and Mesoblast, which are also developing MSC therapies, including for ARDS[150][151][153][154][155] Supply and Manufacturing The company relies on approved third-party contract manufacturers for all development and commercialization phases, ensuring compliance with FDA registration, cGMP, and international regulatory requirements - The company does not own its manufacturing facilities and plans to use approved third-party contract manufacturers for all development phases and post-commercialization[156] - All contract manufacturers must be listed in the New Drug Application (NDA), registered with the FDA, and comply with FDA's cGMP and applicable non-US regulatory requirements[156] Regulation The company's product candidates are extensively regulated by the US FDA and international agencies, requiring rigorous R&D, testing, manufacturing, and marketing compliance, with separate approvals and varying requirements abroad - The company's product candidates are subject to extensive regulation by the US FDA and other national government agencies, covering all aspects from research and development, testing, manufacturing, labeling, promotion, distribution, and marketing[160] - In the US, drugs require a strict process for market approval, including preclinical testing, IND application, adequate and well-controlled clinical trials, NDA submission, FDA manufacturing facility inspection, and FDA approval[163] - Abroad, products require separate approval from local regulatory authorities, with processes and requirements potentially differing from the FDA, and may involve pricing and reimbursement standards[164][166] Employees As of September 30, 2020, the company had 10 employees and several consultants, supplemented by over 30 external professionals in key areas through advisory and collaborative arrangements - As of September 30, 2020, the company had 10 employees and several consultants providing support[169] - Through consulting and collaborative arrangements, including a scientific advisory board, the company gains access to over 30 additional professionals with expertise in business development, legal, accounting, regulatory affairs, clinical operations, and manufacturing[169] Executive Officers of Citius Citius's executive team comprises President and CEO Myron Holubiak, Executive Chairman Leonard Mazur, CFO Jaime Bartushak, and CMO Dr. Myron Czuczman, all with extensive pharmaceutical industry experience - Myron Holubiak serves as President, Chief Executive Officer, and Director, holding the position since March 2016[170] - Leonard Mazur serves as Executive Chairman and Secretary, and has been a Director since September 2014[171] - Jaime Bartushak was appointed Chief Financial Officer in November 2017[172] - Dr. Myron Czuczman was appointed Chief Medical Officer and Executive Vice President in July 2020[173] Other Information The company provides free access to its SEC filings, including 10-K, 10-Q, and 8-K reports, on its website and the SEC's website (www.sec.gov) promptly after electronic submission - The company provides free access to its SEC filings, including 10-K, 10-Q, and 8-K reports, on its website (www.citiuspharma.com)[174](index=174&type=chunk)[175] Risk Factors The company faces significant risks including sustained losses, financing dependency, COVID-19 impacts, regulatory uncertainties, market competition, reliance on third parties, intellectual property challenges, and stock volatility - The company has a history of continuous losses, expects future losses, has not generated revenue, and its profitability depends on the successful development and commercialization of product candidates[180][181][183] - The company requires additional financing in the near term to complete product development and support operations; otherwise, its business will be severely adversely affected[187][190] - The COVID-19 pandemic has adversely affected the Mino-Lok Phase 3 clinical trial, potentially leading to trial delays, increased operating expenses, and significant adverse impacts on financial results[24][197] Risks Related to Our Business and Our Industry The company faces business and industry risks including sustained losses, financing dependency, COVID-19 impacts, product development uncertainties, market acceptance issues, reliance on third parties, and potential conflicts with NoveCite - The company has a history of continuous losses, expects future losses, and has not generated revenue, with profitability dependent on the successful development and commercialization of product candidates[180][181][183] - The company requires additional financing in the near term to complete product development and support operations; otherwise, its business will be severely adversely affected[187][190] - The COVID-19 pandemic has adversely affected the Mino-Lok Phase 3 clinical trial, potentially leading to trial delays, increased operating expenses, and significant adverse impacts on financial results[24][197] - Product development is inherently complex, unpredictable, time-consuming, and costly, potentially leading to product candidate failures in clinical trials or inability to obtain regulatory approval[202] - The company's reliance on third-party contract research organizations (CROs) and manufacturers may lead to clinical trial delays, increased costs, or hindered product commercialization[252][254] - The company holds a 75% equity stake in NoveCite, will share profits with another shareholder, and overlapping directors and executives with NoveCite may create conflicts of interest[224][225][276][281] Risks Related to Our Regulatory and Legal Environment The company faces extensive and costly government regulation, including strict FDA approval processes, risking development delays, increased costs, or approval failure, with post-market restrictions and product liability claims also present - The company's product candidates are subject to extensive and stringent domestic and international government regulation, making the research, development, manufacturing, and sales processes costly and uncertain[284] - Failure to obtain necessary regulatory approvals will severely harm the company's business, potentially leading to an inability to sell products and a lack of revenue sources[287][288] - Even if regulatory approval is obtained, products may face strict post-market regulation for marketing and promotion, with violations potentially leading to regulatory actions, fines, and damages[295][297] - Product use may lead to product liability claims and financial losses, and existing insurance may be insufficient to cover all liabilities[299] Risks Related to Our Intellectual Property The company's business relies on intellectual property protection, but faces risks of patent challenges, trade secret disclosure, third-party infringement claims, and weakened patent value due to legal changes - The company's business success depends on intellectual property protection, including patents, trade secrets, copyrights, and trademarks, but patents may be challenged, invalidated, or circumvented, failing to provide a competitive advantage[301] - Trade secret protection relies on confidentiality agreements with employees and other parties, but there is a risk of agreements being breached or trade secrets being independently developed by competitors[305][306] - If the company's products infringe third-party proprietary rights, it may need to obtain licenses (which may be unavailable or costly), abandon product development, redesign products, or pay damages[307][308] - The US government may have "march-in rights" over certain intellectual property; if government funds were used for R&D, it might require the company to grant the government a license[309] - Changes in patent law or case law (such as the America Invents Act) may weaken patent value, increasing uncertainty and costs in patent application and enforcement[311][312][313][315] Risks Related to Our Securities The company's securities face NASDAQ delisting risk, potential stock liquidity impairment, and 'penny stock' designation, with future equity issuances risking dilution, concentrated insider control affecting prices, and no foreseeable dividend payments - The company's common stock and certain warrants are listed on the Nasdaq Capital Market, but the company has twice failed to meet listing standards, most recently between April and July 2020, posing a risk of future delisting[317][318][321] - If common stock is delisted and designated as a "penny stock," it could make it difficult for brokers to trade and investors to buy or sell, thereby impairing stock liquidity[323][324] - Future issuance of additional common stock or securities convertible into common stock may result in equity dilution for existing shareholders and exert downward pressure on the stock price[332][333] - As of November 30, 2020, the company's executive officers and directors beneficially owned approximately 34.0% of the outstanding common stock, and this concentrated control could adversely affect the stock price[335] - The company has not paid dividends on its common stock to date and does not intend to pay them in the foreseeable future, which may affect the market value of the stock[336] Unresolved Staff Comments This report item regarding "Unresolved Staff Comments" is not applicable to the company - This report item regarding "Unresolved Staff Comments" is not applicable[338] Properties The company leases office space at 11 Commerce Drive in Cranford, New Jersey, with the lease term extending until October 31, 2025 - The company leases office space in Cranford, New Jersey, with the lease term extending until October 31, 2025[339] Legal Proceedings The company is not currently involved in material litigation but anticipates potential future involvement in legal proceedings arising from ordinary business activities - The company is not currently involved in any litigation that could have a material adverse effect on its financial condition or operating results[340] - The company anticipates potential future involvement in litigation arising from ordinary business activities[341] Mine Safety Disclosures This report item regarding "Mine Safety Disclosures" is not applicable to the company - This report item regarding "Mine Safety Disclosures" is not applicable[342] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock and warrants trade on Nasdaq, with approximately 95 registered shareholders; no dividends have been paid, and no equity securities were purchased during the reporting period - The company's common stock and certain warrants trade on the Nasdaq Capital Market under the symbols "CTXR" and "CTXRW," respectively[346] - As of November 30, 2020, the company had approximately 95 registered holders of its common stock[347] - The company has never paid dividends and plans to use future earnings for business growth, not anticipating cash dividends in the foreseeable future[348] - The company did not purchase any common stock during the fourth quarter of the fiscal year ended September 30, 2020[350] Selected Financial Data This report item regarding "Selected Financial Data" is not required for the company - This report item regarding "Selected Financial Data" is not required[351] Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes the company's FY2020 financial condition and operating results, detailing its development, licensing, expense changes, sustained losses, and liquidity, with increased net loss driven by administrative costs and ongoing financing dependency - The company is a specialty pharmaceutical company focused on developing and commercializing critical care products, expanding its business through the acquisition of LMB and the formation of NoveCite[354][357] - The company generated no revenue in FY2020 and FY2019, primarily focusing on product development, financing, and infrastructure construction[357][366] Operating Expenses Comparison (2019 vs 2020) | Indicator | September 30, 2020 (USD) | September 30, 2019 (USD) | Change (USD) | Change (%) | | :----------------------------------- | :------------------- | :------------------- | :---------- | :------- | | Research and Development Expenses | 8,812,810 | 8,596,898 | 215,912 | 2.51% | | General and Administrative Expenses | 8,094,614 | 6,285,480 | 1,809,134 | 28.78% | | Stock-based Compensation – General and Administrative | 803,261 | 715,983 | 87,278 | 12.19% | | Total Operating Expenses | 17,710,685 | 15,598,361 | 2,112,324 | 13.54% | | Operating Loss | (17,710,685) | (15,598,361) | (2,112,324) | 13.54% | | Net Loss | (17,548,085) | (15,562,144) | (1,985,941) | 12.76% | - The company's net loss increased by $1,985,941 from $15,562,144 in FY2019 to $17,548,085 in FY2020, primarily due to increased general and administrative expenses[374] - As of September 30, 2020, the company had an accumulated deficit of $70,593,867 and negative operating cash flow, indicating substantial doubt about its ability to continue as a going concern and reliance on future financing[376][377][384] Historical Background Citius Pharmaceuticals, Inc. is a specialty pharmaceutical company focused on critical care, expanding through acquisitions and the formation of NoveCite, primarily dedicated to product development, financing, and infrastructure without generating revenue - The company is a specialty pharmaceutical company focused on the development and commercialization of critical care products[354] - The company expanded its business through the acquisition of Citius Pharmaceuticals, LLC (2014) and Leonard-Meron Biosciences, Inc. (LMB, 2016)[354][355] - On September 11, 2020, the company formed NoveCite, Inc., holding 75% of its outstanding shares[357] - Since its inception, the company has primarily focused on product development, financing, and infrastructure construction, and has not generated any revenue[357] Patent and Technology License Agreements The company holds development and commercialization rights for Mino-Lok, Mino-Wrap, and NoveCite via licensing agreements, involving various annual fees, milestone payments, and sales royalties for each product - The Mino-Lok license agreement stipulates annual maintenance fees (up to $90,000), sales milestone payments (up to $1.1 million), and sales royalties (mid-single digits to low double-digit percentages)[358] - The Mino-Wrap license agreement includes a $125,000 non-refundable upfront payment, annual maintenance fees (up to $90,000), milestone payments (up to $2.1 million), and sales royalties (mid-single digits to high single-digit percentages)[360] - The NoveCite license agreement involves a $5 million upfront payment, issuance of 25% equity in NoveCite to Novellus, up to $51 million in regulatory and development milestone payments, and low double-digit percentage net sales royalties[362][363] Results of Operations for Year Ended September 30, 2020 compared to Year Ended September 30, 2019 The company reported no revenue in FY2020 and FY2019; R&D expenses slightly increased due to Halo-Lido and ARDS investments, while general and administrative expenses significantly rose, leading to a net loss increase from $15.56 million in 2019 to $17.55 million in 2020 - The company generated no revenue in both FY2020 and FY2019[366] R&D Expenses Change (2019 vs 2020) | Product | September 30, 2020 (USD) | September 30, 2019 (USD) | Change (USD) | | :------------------- | :------------------- | :------------------- | :---------- | | Mino-Lok® | 6,207,018 | 7,148,284 | (941,266) | | Halo-Lido | 1,646,043 | 1,323,614 | 322,429 | | Mino-Wrap | 113,517 | 125,000 | (11,483) | | ARDS (NoveCite) | 846,232 | — | 846,232 | | Total R&D Expenses | 8,812,810 | 8,596,898 | 215,912 | - General and administrative expenses increased by $1,809,134 from $6,285,480 in 2019 to $8,094,614 in 2020, primarily due to the hiring of a new Chief Medical Officer, investor relations, and other consulting service fees[370] - Net loss increased from $15,562,144 in 2019 to $17,548,085 in 2020, primarily due to increased general and administrative expenses[374] Liquidity and Capital Resources The company faces continuous losses, negative operating cash flow, and an accumulated deficit of $70.6 million as of September 30, 2020, raising going concern doubts; it relies on equity financing, securing $22.7 million in FY2020, and plans future fundraising to extend operations beyond March 2021 - The company incurred losses of $17,548,085 in FY2020 and $15,562,144 in FY2019, with an accumulated deficit of $70,593,867 as of September 30, 2020[376] - The company's operating cash flow has been consistently negative, utilizing $16,930,658 in FY2020 and $12,437,751 in FY2019[376] - The company primarily obtains funds through equity financing, securing $22,733,850 in net proceeds from stock issuances and warrant exercises in FY2020, and received a $164,583 PPP loan[378] - The company expects existing capital to sustain operations until March 2021 and plans to continue fundraising in the future, but cannot guarantee successful or timely access to sufficient funds[384] Inflation Management believes inflation has not materially impacted the company's operating results - Management believes that inflation has not had a material impact on the company's operating results[386] Off Balance Sheet Arrangements The company has no off-balance sheet arrangements - The company has no off-balance sheet arrangements[387] Critical Accounting Policies The company's critical accounting policies cover R&D expenses, in-process R&D, goodwill impairment testing, and income tax recognition, including deferred tax assets and liabilities with a valuation allowance - Research and development expenses (including upfront and milestone payments) are expensed as incurred, while non-refundable upfront payments are deferred and capitalized until goods are delivered or services performed[389][450] - In-process research and development (such as Mino-Lok) and goodwill are tested annually for impairment, with no impairment occurring as of September 30, 2020[390][391][394][451][452][455] - The company recognizes deferred tax assets and liabilities based on differences between financial reporting and tax bases, and establishes a valuation allowance against deferred tax assets to reflect the uncertainty of their realization[395][396][461] Quantitative and Qualitative Disclosures About Market Risk This report item regarding "Quantitative and Qualitative Disclosures About Market Risk" is not required - This report item regarding "Quantitative and Qualitative Disclosures About Market Risk" is not required[397] Financial Statements and Supplementary Data This section presents the company's consolidated financial statements for FY2020 and FY2019, including auditor's report, balance sheets, statements of operations, equity changes, cash flows, and notes, emphasizing going concern doubts and detailing key financial policies and transactions - The independent registered public accounting firm's report emphasizes the company's continuous losses and negative operating cash flow, raising substantial doubt about its ability to continue as a going concern[402][403] Consolidated Balance Sheet Summary (as of September 30) | Indicator | 2020 (USD) | 2019 (USD) | | :------------------- | :------------ | :------------ | | Total Assets | 43,773,655 | 36,746,394 | | Total Liabilities | 10,102,987 | 9,593,522 | | Stockholders' Equity | 33,670,668 | 27,152,872 | | Cash and Cash Equivalents | 13,859,748 | 7,893,804 | | Accumulated Deficit | (70,593,867) | (53,045,782) | Consolidated Statements of Operations Summary (as of September 30) | Indicator | 2020 (USD) | 2019 (USD) | | :------------------- | :------------ | :------------ | | Revenue | — | — | | Research and Development Expenses | 8,812,810 | 8,596,898 | | General and Administrative Expenses | 8,094,614 | 6,285,480 | | Stock-based Compensation | 803,261 | 715,983 | | Operating Loss | (17,710,685) | (15,598,361) | | Net Loss | (17,548,085) | (15,562,144) | | Basic and Diluted Net Loss Per Share | (0.45) | (0.77) | | Weighted Average Shares Outstanding | 39,165,248 | 20,161,854 | Consolidated Statements of Cash Flows Summary (as of September 30) | Cash Flow Activity | 2020 (USD) | 2019 (USD) | | :------------------- | :------------ | :------------ | | Net Cash Outflow from Operating Activities | (16,930,658) | (12,437,751) | | Net Cash Outflow from Investing Activities | (1,831) | — | | Net Cash Inflow from Financing Activities | 22,898,433 | 11,147,552 | | Increase (Decrease) in Cash and Cash Equivalents | 5,965,944 | (1,290,199) | | Cash and Cash Equivalents at End of Period | 13,859,748 | 7,893,804 | Report of Independent Registered Public Accounting Firm Wolf & Company, P.C. issued an unqualified opinion on the company's consolidated financial statements, while emphasizing continuous losses and negative cash flow, which raise substantial doubt about its going concern ability - Independent registered public accounting firm Wolf & Company, P.C. issued an unqualified opinion on the company's financial statements[402] - The report emphasizes the company's continuous losses and negative operating cash flow, raising substantial doubt about its ability to continue as a going concern[403] Consolidated Balance Sheets As of September 30, 2020, total assets increased to $43.77 million from $36.75 million in 2019, with cash rising to $13.86 million; total liabilities and stockholders' equity increased, but the accumulated deficit expanded to $70.59 million Consolidated Balance Sheet Key Data (as of September 30) | Indicator | 2020 (USD) | 2019 (USD) | | :------------------- | :------------ | :------------ | | Cash and Cash Equivalents | 13,859,748 | 7,893,804 | | Total Current Assets | 13,981,985 | 7,941,915 | | In-Process Research and Development | 19,400,000 | 19,400,000 | | Goodwill | 9,346,796 | 9,346,796 | | Total Assets | 43,773,655 | 36,746,394 | | Total Current Liabilities | 4,097,133 | 4,607,722 | | Deferred Tax Liability | 4,985,800 | 4,985,800 | | Total Liabilities | 10,102,987 | 9,593,522 | | Accumulated Deficit | (70,593,867) | (53,045,782) | | Total Stockholders' Equity | 33,670,668 | 27,152,872 | Consolidated Statements of Operations The company reported no revenue in 2020 and 2019; operating loss expanded to $17.71 million in 2020 from $15.60 million in 2019, with net loss increasing to $17.55 million and basic/diluted net loss per share at $0.45 Consolidated Statements of Operations Key Data (as of September 30) | Indicator | 2020 (USD) | 2019 (USD) | | :----------------------------------- | :------------ | :------------ | | Revenue | — | — | | Research and Development Expenses | 8,812,810 | 8,596,898 | | General and Administrative Expenses | 8,094,614 | 6,285,480 | | Stock-based Compensation – General and Administrative | 803,261 | 715,983 | | Total Operating Expenses | 17,710,685 | 15,598,361 | | Operating Loss | (17,710,685) | (15,598,361) | | Interest Income | 68,066 | 52,660 | | Other Income | 110,207 | — | | Interest Expense | (15,673) | (16,443) | | Net Loss | (17,548,085) | (15,562,144) | | Basic and Diluted Net Loss Per Share | (0.45) | (0.77) | | Weighted Average Shares Outstanding | 39,165,248 | 20,161,854 | Consolidated Statements of Changes in Stockholders' Equity As of September 30, 2020, total stockholders' equity increased to $33.67 million from $27.15 million in 2019, driven by increased paid-in capital from warrant exercises and public offerings, despite an expanded accumulated deficit Consolidated Statements of Changes in Stockholders' Equity Summary (as of September 30) | Indicator | 2020 (USD) | 2019 (USD) | | :------------------- | :------------ | :------------ | | Common Stock Capital | 55,577 | 28,930 | | Additional Paid-in Capital | 104,208,958 | 80,169,724 | | Accumulated Deficit | (70,593,867) | (53,045,782) | | Total Stockholders' Equity | 33,670,668 | 27,152,872 | - In FY2020, additional paid-in capital increased by approximately $24 million through warrant exercises and public offerings of common stock[415] - The net loss of $17,548,085 in FY2020 led to a further expansion of the accumulated deficit[415] Consolidated Statements of Cash Flows The company reported net cash outflow of $16.93 million from operations and $1,831 from investing in FY2020; net cash inflow of $22.90 million from financing, primarily equity, increased cash and cash equivalents by $5.97 million to $13.86 million Consolidated Statements of Cash Flows Key Data (as of September 30) | Cash Flow Activity | 2020 (USD) | 2019 (USD) | | :------------------- | :------------ | :------------ | | Net Cash Outflow from Operating Activities | (16,930,658) | (12,437,751) | | Net Cash Outflow from Investing Activities | (1,831) | — | | Net Cash Inflow from Financing Activities | 22,898,433 | 11,147,552 | | Increase (Decrease) in Cash and Cash Equivalents | 5,965,944 | (1,290,199) | | Cash and Cash Equivalents at End of Period | 13,859,748 | 7,893,804 | - Net cash inflow from financing activities significantly increased in FY2020, primarily from common stock warrant exercises ($7,156,549) and public offerings ($15,577,301)[419] - Operating cash outflow continued to increase, reflecting the company's investments in product development and commercialization activities[419] Notes to Consolidated Financial Statements The notes detail the company's business, accounting basis, prior period restatement, going concern, patent and license agreements, critical accounting policies, debt, equity, related party transactions, and commitments - The notes detail the company's business nature as a specialty pharmaceutical company and its expansion through the acquisition of LMB and the formation of NoveCite[422][423][424] - The company restated its consolidated balance sheet and statements of changes in stockholders' equity as of September 30, 2019, to correct errors related to deferred tax liabilities, goodwill, and accumulated deficit[428][429][431] - The notes emphasize the company's continuous losses and negative operating cash flow, raising substantial doubt about its ability to continue as a going concern and its reliance on future equity financing[432][433] - Detailed terms of the Mino-Lok, Mino-Wrap, and NoveCite patent and technology license agreements are disclosed, including maintenance fees, milestone payments, and sales royalties[434][435][436][438][439][440][442][443][444][446][447] - As of September 30, 2020, the company disclosed 3,390,171 stock options and 26,831,989 warrants outstanding, along with related equity issuances and incentive plans[490][495] Changes in and Disagreements With Accountants on Accounting and Financial Disclosure The company has not experienced any change in accountants or disagreements regarding accounting and financial disclosure - The company has not experienced any change in accountants nor any disagreements with accountants on accounting and financial disclosure matters[524] Controls and Procedures As of September 30, 2020, management assessed disclosure controls and internal control over financial reporting as effective, with prior material weaknesses corrected in FY2018 and no significant changes during the reporting period - As of September 30, 2020, the company's Chief Executive Officer and Chief Financial Officer assessed and determined its disclosure controls and procedures to be effective[526] - Management, based on COSO (2013 framework) criteria, concluded that the company's internal control over financial reporting was effective as of September 30, 2020[527][528] - The company corrected previously identified material weaknesses in internal control as of September 30, 2018, and is committed to continuous improvement[326] - No changes in internal control over financial reporting occurred during the fourth quarter of FY2020 that materially affected internal control over financial reporting[530] Other Information This report contains no disclosures under the "Other Information" item - This report contains no disclosures under the "Other Information" item[532] PART III Directors, Executive Officers and Corporate Governance The company adopted a Code of Ethics for all personnel; other information on directors, executive officers, and corporate governance will be disclosed by reference to the 2021 Annual Meeting Proxy Statement - The company has adopted a written Code of Ethics and Business Conduct applicable to all directors, officers, and employees, available on the company's website[535] - Other information regarding directors, executive officers, and corporate governance will be disclosed by reference to relevant sections in the 2021 Annual Meeting Proxy Statement[536] Executive Compensation Information regarding director and executive compensation will be disclosed by reference to the 2021 Annual Meeting Proxy Statement - Information regarding director and executive compensation will be disclosed by reference to relevant sections in the 2021 Annual Meeting Proxy Statement[537] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters As of September 30, 2020, the company had 3,390,171 outstanding options, warrants, and rights under shareholder-approved equity incentive plans, with a $2.51 weighted-average exercise price and 2,465,000 shares available for future grants Equity Incentive Plan Security Ownership (as of September 30, 2020) | Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (USD) | Number of Securities Remaining Available for Future Issuance | | :----------------------------------- | :------------------- | :------------------- | :------------------- | | 2014 Stock Incentive Plan | 855,171 | 6.65 | — | | 2018 Omnibus Stock Incentive Plan | 1,890,000 | 1.08 | — | | 2020 Omnibus Stock Incentive Plan | 645,000 | 1.22 | 2,465,000 | | Total | 3,390,171 | 2.51 | 2,465,000 | - All company equity incentive plans have received shareholder approval, and no further awards will be granted under the 2014 and 2018 plans[539] - Other information regarding security ownership of certain beneficial owners and management will be disclosed by reference to relevant sections in the proxy statement[539] Certain Relationships and Related Transactions, and Director Independence Information regarding certain relationships, related transactions, and director independence will be disclosed by reference to the 2021 Annual Meeting Proxy Statement - Information regarding certain relationships and related transactions, and director independence will be disclosed by reference to relevant sections in the 2021 Annual Meeting Proxy Statement[540] Principal Accountant Fees and Services Information regarding principal accountant fees and services will be disclosed by reference to the 2021 Annual Meeting Proxy Statement - Information regarding principal accountant fees and services will be disclosed by reference to relevant sections in the 2021 Annual Meeting Proxy Statement[541] PART IV Exhibits and Financial Statement Schedules This section lists the company's filed exhibits, including articles of incorporation, warrants, license agreements, equity incentive plans, employment agreements, and SEC-required certification and XBRL taxonomy files - Exhibits include important legal and operational documents such as articles of incorporation, warrants, license agreements, stock incentive plans, and employment agreements[544][545][546] - Also included are various certification documents (e.g., CEO and CFO certifications) and XBRL taxonomy files required by the SEC to ensure transparency and compliance in financial reporting[546] Form 10-K Summary This report item regarding "Form 10-K Summary" is not applicable - This report item regarding "Form 10-K Summary" is not applicable[546] Signatures This report has been signed by Citius Pharmaceuticals, Inc.'s authorized representatives, including the Executive Chairman, President and CEO, CFO, and directors, in accordance with the Securities Exchange Act of 1934, all dated December 16, 2020 - This report has been signed by Citius Pharmaceuticals, Inc. by its authorized representatives in accordance with the requirements of the Securities Exchange Act of 1934[548][549] - Signatories include Executive Chairman Leonard Mazur, President and Chief Executive Officer Myron Holubiak, Chief Financial Officer Jaime Bartushak, and several directors[552] - All signatures are dated December 16, 2020[551][552]