Citius Oncology, Inc.(CTOR) - 2025 Q2 - Quarterly Report

FORM 10-Q Cover Page Citius Oncology, Inc. filed its Quarterly Report on Form 10-Q for the period ended June 30, 2025, classifying as a non-accelerated filer, smaller reporting company, and emerging growth company - Citius Oncology, Inc. filed its Quarterly Report on Form 10-Q for the period ended June 30, 2025. The company is incorporated in Delaware, with its common stock (CTOR) registered on the Nasdaq Capital Market. It is classified as a non-accelerated filer, a smaller reporting company, and an emerging growth company[1][2][3] Company Classification | Classification | Status | | :-------------------- | :----- | | Large accelerated filer | ☐ | | Accelerated filer | ☐ | | Non-accelerated filer | ☒ | | Smaller reporting company | ☒ | | Emerging growth company | ☒ | - As of August 11, 2025, there were 78,370,584 shares of common stock, $0.0001 par value, issued and outstanding[3] TABLE OF CONTENTS EXPLANATORY NOTE This section defines key terms used throughout the report, specifically "Company," "Citius Oncology," and the trademark LYMPHIR - The terms 'Company,' 'Citius Oncology,' 'we,' 'us,' and 'our' refer to Citius Oncology, Inc. and its wholly-owned subsidiary Citius Oncology Sub Inc. LYMPHIR (denileukin diftitox) is a registered trademark of the Company[7][8] CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This section highlights that the report contains forward-looking statements subject to risks and uncertainties, with no obligation to update them beyond the filing date - This report contains forward-looking statements based on current expectations, estimates, and projections, which are subject to risks, uncertainties, and assumptions that could cause actual results to differ materially[10] - Key risks include substantial doubt about the Company's ability to continue as a going concern, the need for additional funds for LYMPHIR launch, ability to commercialize LYMPHIR, maintaining Nasdaq listing compliance, dependence on third-party suppliers, and uncertainties related to clinical testing, approval, and commercialization of product candidates[10][12] - The Company does not undertake any obligation to update forward-looking statements beyond the filing date, except as required by applicable securities laws[11] PART I - FINANCIAL INFORMATION Item 1. Financial Statements. This section presents the unaudited condensed consolidated financial statements, including the balance sheets, statements of operations, changes in stockholders' equity, and cash flows, along with detailed notes explaining the company's nature of operations, significant accounting policies, financial position, and recent events Condensed Consolidated Balance Sheets This section provides a snapshot of the company's assets, liabilities, and equity at specific points in time, highlighting changes in financial position Condensed Consolidated Balance Sheets (Unaudited) | Metric | June 30, 2025 | September 30, 2024 | | :-------------------------------- | :-------------- | :----------------- | | Cash and cash equivalents | $112 | $112 | | Inventory | $17,208,967 | $8,268,766 | | Total Current Assets | $18,309,079 | $10,968,878 | | Total Assets | $91,709,079 | $84,368,878 | | Total Current Liabilities | $52,990,335 | $32,700,428 | | Total Liabilities | $59,311,166 | $38,228,539 | | Total Stockholders' Equity | $32,397,913 | $46,140,339 | - Total Current Assets increased by approximately $7.34 million, primarily driven by a significant increase in inventory. Total Current Liabilities increased by approximately $20.29 million, mainly due to increases in accounts payable and accrued expenses. Total Stockholders' Equity decreased by approximately $13.74 million[15] Condensed Consolidated Statements of Operations This section details the company's revenues, expenses, and net loss over specific periods, reflecting operational performance Condensed Consolidated Statements of Operations (Unaudited) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Revenues | $— | $— | $— | $— | | Research and development | $938,277 | $1,131,439 | $5,342,198 | $3,628,900 | | General and administrative | $1,881,447 | $1,540,411 | $7,446,753 | $4,443,899 | | Stock-based compensation | $2,125,237 | $1,957,000 | $6,022,287 | $5,831,000 | | Total Operating Expenses | $4,944,961 | $4,628,850 | $18,811,238 | $13,903,799 | | Operating Loss | $(4,944,961) | $(4,628,850) | $(18,811,238) | $(13,903,799) | | Interest expense | $160,755 | $— | $160,755 | $— | | Net Loss | $(5,369,956) | $(4,772,850) | $(19,764,713) | $(14,335,799) | | Net Loss Per Share - Basic and Diluted | $(0.08) | $(0.07) | $(0.28) | $(0.21) | - The Company reported no revenues for both periods. Net loss increased for both the three-month and nine-month periods ended June 30, 2025, primarily due to higher general and administrative expenses, stock-based compensation, and the introduction of interest expense[17] Condensed Consolidated Statements of Changes in Stockholders' Equity This section outlines the changes in the company's equity accounts, including common stock, additional paid-in capital, and accumulated deficit Changes in Stockholders' Equity (Unaudited) | Metric | Balance, September 30, 2024 | Balance, June 30, 2025 | | :-------------------------- | :-------------------------- | :--------------------- | | Common Stock (Shares) | 71,552,402 | 71,552,402 | | Common Stock (Amount) | $7,155 | $7,155 | | Additional Paid-In Capital | $85,411,771 | $91,434,058 | | Accumulated Deficit | $(39,278,587) | $(59,043,300) | | Total Stockholders' Equity | $46,140,339 | $32,397,913 | - Total stockholders' equity decreased from $46.14 million at September 30, 2024, to $32.40 million at June 30, 2025, primarily due to accumulated net losses, partially offset by increases in additional paid-in capital from stock-based compensation[19] Condensed Consolidated Statements of Cash Flows This section presents the cash inflows and outflows from operating, investing, and financing activities, showing changes in cash and cash equivalents Condensed Consolidated Statements of Cash Flows (Unaudited) | Metric | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------ | :------------------------------ | | Net loss | $(19,764,713) | $(14,335,799) | | Stock-based compensation expense | $6,022,287 | $5,831,000 | | Deferred income tax expense | $792,720 | $432,000 | | Inventory change | $(8,940,201) | $0 | | Prepaid expenses change | $1,600,000 | $(2,271,920) | | Accounts payable change | $4,955,797 | $(1,289,045) | | Accrued expenses change | $8,458,554 | $185,930 | | Due to related party change | $6,875,556 | $11,447,834 | | Net Cash Provided By Operating Activities | $0 | $0 | | Cash and Cash Equivalents – End of Period | $112 | $0 | - Despite a net loss, the company reported zero net cash provided by operating activities for both periods, with cash and cash equivalents remaining at $112 at June 30, 2025. Significant adjustments include stock-based compensation, deferred income tax, and changes in working capital accounts like inventory, accounts payable, and accrued expenses[21] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements, covering accounting policies and significant events 1. NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note describes Citius Oncology's business, its reliance on Citius Pharma, and the accounting treatment of its merger and subsequent capital structure - Citius Oncology is a specialty pharmaceutical company focused on developing and commercializing critical care oncology products, primarily LYMPHIR (denileukin diftitox) for cutaneous T-cell lymphoma (CTCL). The company has relied on funding from Citius Pharmaceuticals, Inc. (Citius Pharma) since its inception[24][25][26] - The Company completed a merger on August 12, 2024, with TenX Keane Acquisition, where TenX was renamed Citius Oncology, Inc. and SpinCo (holding LYMPHIR assets) became a wholly-owned subsidiary. For accounting purposes, Citius Oncology was deemed the accounting acquirer, and the merger was treated as a recapitalization[29][30] - Post-merger, Citius Pharma owned approximately 92.3% of Citius Oncology's common stock, which decreased to 84.3% by July 17, 2025. Citius Pharma made significant capital investments, including cash contributions and reclassifying intercompany receivables[29][32] 2. GOING CONCERN UNCERTAINTY AND MANAGEMENT'S PLAN This note addresses the company's financial viability concerns and outlines management's strategies to secure additional funding and generate revenue - The Company reported a net loss of $19,764,713 for the nine months ended June 30, 2025, and had $112 in cash with a negative working capital of $34.7 million at period end, raising substantial doubt about its ability to continue as a going concern beyond September 2025[38][40] - To address this, Citius Oncology completed a public offering on July 17, 2025, raising approximately $7.44 million in net proceeds. The company plans to continue relying on Citius Pharma funding, raise additional capital through equity financings, and generate revenue from LYMPHIR sales[39][41] - There is no assurance that Citius Pharma will continue funding, that the Company will successfully raise needed capital on acceptable terms, or that it will find strategic partners or generate substantial revenue from LYMPHIR sales[41] 3. INVENTORY This note details the composition and significant increase in the company's inventory, primarily for its commercial product LYMPHIR Inventory Composition | Inventory Type | June 30, 2025 | September 30, 2024 | | :--------------- | :-------------- | :----------------- | | Finished goods | $8,962,493 | $6,134,895 | | Work in process | $8,246,474 | $2,133,862 | | Total Inventory | $17,208,967 | $8,268,766 | - Inventory, primarily related to LYMPHIR commercial products expected to be sold starting in Q4 2025, significantly increased from $8.27 million to $17.21 million. No reserves against inventory were deemed necessary[42] 4. PREPAID EXPENSES This note explains the nature and changes in prepaid expenses, representing advance payments for manufacturing and R&D costs Prepaid Expenses | Date | Amount | | :------------- | :------- | | June 30, 2025 | $1,100,000 | | September 30, 2024 | $2,700,000 | - Prepaid expenses decreased from $2.7 million to $1.1 million, representing advance payments for long-lead time drug substance and product costs for R&D or LYMPHIR manufacturing[43] 5. PATENT AND TECHNOLOGY LICENSE AGREEMENTS This note describes the company's exclusive license for LYMPHIR, related milestone payments, and commercialization obligations - Citius Oncology holds an exclusive license for LYMPHIR (E7777/denileukin diftitox) from Eisai, acquired via Dr. Reddy's, for most markets outside Japan and parts of Asia. The FDA approved LYMPHIR in August 2024[44][45] - Upon FDA approval, a $27.5 million milestone payment became due to Dr. Reddy's, with $22.5 million remaining as of June 30, 2025, partially deferred without penalty. Payments of $1 million (by Citius Pharma) and $1.25 million (by Citius Oncology) were made in July 2025[46] - A $5.9 million milestone payment to Eisai was also due upon FDA approval, included in license payable. An amended payment schedule was agreed upon in March 2025, incurring $160,755 in interest expense for the nine months ended June 30, 2025. Subsequent payments to Eisai totaling $2,535,318 plus interest were made in July 2025[47][48] - The Company acquired method-of-use patents for LYMPHIR in combination with PD-1 pathway inhibitors and is obligated to use commercially reasonable efforts to launch products in CTCL and other indications within six months of regulatory approval[50][51] 6. STOCKHOLDER'S EQUITY This note details changes in the company's authorized common stock, stock option activity, and stock-based compensation expenses - The Company's authorized common stock increased from 100,000,000 to 400,000,000 shares on April 7, 2025. Two stock incentive plans (2023 and 2024 Omnibus Stock Incentive Plans) reserved a total of 30,000,000 common shares for issuance[53][54] Stock Option Activity Summary | Metric | Outstanding at September 30, 2024 | Granted | Forfeited | Outstanding at June 30, 2025 | | :-------------------------- | :-------------------------------- | :-------- | :-------- | :--------------------------- | | Shares | 12,750,000 | 5,750,000 | (333,333) | 18,166,667 | | Weighted Average Exercise Price | $2.15 | $1.07 | $1.74 | $1.82 | | Weighted Average Remaining Contractual Term | 8.78 years | N/A | N/A | 8.43 years | | Aggregate Intrinsic Value | $— | N/A | N/A | $46,051,667 | - Stock-based compensation expense was $2,125,237 for the three months and $6,022,287 for the nine months ended June 30, 2025, an increase from the prior year, primarily due to new options granted in December 2024. Unrecognized compensation cost of $9,909,073 is expected to be recognized over 1.41 years[58][59] 7. COMMERCIAL MANUFACTURING CONTRACTS This note outlines the company's minimum purchase commitments under contracts for drug substance and finished drug product manufacturing - The Company has a contract with a manufacturing organization for drug substance supply through 2026, with minimum purchase commitments of approximately $18.3 million as of June 30, 2025 ($11.9 million for 2025 and $5.4 million for 2026, plus $1.0 million for 2026 pass-throughs)[60] - Additionally, commercial supply agreements for finished drug product completion and packaging with two other vendors amount to approximately $4.5 million in minimum purchase commitments ($2.9 million for 2025 and $1.6 million for 2026)[61] 8. RELATED PARTY TRANSACTIONS This note describes the shared services agreement with Citius Pharma and financial transactions between the two entities - Citius Pharma provides management and scientific services to Citius Oncology under a shared services agreement. All Citius Oncology expenditures are paid by Citius Pharma and reflected in the 'due to related party' account[62][65] Charges from Citius Pharma to Citius Oncology | Expense Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | General & Administrative Payroll | $567,937 | $474,688 | $1,703,811 | $1,330,364 | | Research & Development Payroll | $480,000 | $515,838 | $1,440,000 | $1,481,964 | | Shared Office Space | $27,939 | $30,368 | $86,246 | $91,103 | - Citius Pharma advanced $3,800,111 to the Company via a non-interest bearing, unsecured promissory note, repayable upon a financing of at least $10 million by the Company[65] 9. NASDAQ LISTING This note reports on the company's compliance status with Nasdaq's minimum bid price rule - Citius Oncology received a Nasdaq notification on April 23, 2025, for non-compliance with the minimum bid price rule (below $1.00 for 30 consecutive business days). The Company regained compliance on June 26, 2025, after its common stock closed at or above $1.00 for 10 consecutive trading days[66] 9. SUBSEQUENT EVENTS This note discloses significant events occurring after the reporting period, including a public offering and warrant issuance - On July 17, 2025, the Company completed a public offering of 6,818,182 shares of common stock and warrants, generating gross proceeds of $9.0 million and net proceeds of approximately $7.44 million after deducting fees and expenses[67] - The offering included warrants to purchase 6,818,182 shares at an exercise price of $1.32 per share, immediately exercisable for five years. The placement agent also received warrants to purchase up to 272,727 shares at $1.65 per share[67][68] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. This section provides management's perspective on the company's financial condition and results of operations, comparing the three and nine months ended June 30, 2025, to the corresponding periods in 2024. It covers business overview, license agreements, detailed analysis of operating expenses, liquidity, and capital resources Business This section provides an overview of Citius Oncology as a specialty biopharmaceutical company focused on targeted oncology therapies, particularly LYMPHIR - Citius Oncology is a specialty biopharmaceutical company focused on developing and commercializing targeted oncology therapies, with LYMPHIR (denileukin diftitox) approved by the FDA in August 2024 for CTCL[71] - The Company reincorporated in Delaware in August 2024 and acquired SpinCo, which began operations in April 2022. Since inception, efforts have focused on business planning, R&D, and staffing[72][73] License Agreement with Eisai This section details the exclusive license agreement for LYMPHIR, including FDA approval, milestone payments, and commercialization obligations - Citius Oncology holds an exclusive license for LYMPHIR (E7777) from Eisai, acquired from Dr. Reddy's, for development and commercialization in most markets, excluding Japan and parts of Asia. The FDA approved LYMPHIR on August 8, 2024[74][75][77] - Milestone payments due upon FDA approval included $27.5 million to Dr. Reddy's (with $22.5 million outstanding as of June 30, 2025, partially deferred) and $5.9 million to Eisai (included in license payable). An amended payment schedule for Eisai incurred $160,755 in interest expense[76][77][78] - The Company is obligated to use commercially reasonable efforts to launch LYMPHIR in CTCL and other indications and to initiate two immuno-oncology trials, both of which have been initiated[80] RESULTS OF OPERATIONS This section analyzes the company's financial performance, focusing on revenues, operating expenses, and net loss for the reported periods Three months ended June 30, 2025 compared with the three months ended June 30, 2024 This subsection compares the company's financial results for the three-month periods, highlighting changes in net loss and operating expenses - No revenues were generated in either period. Net loss increased by $597,106 to $5,369,956, primarily due to higher general and administrative expenses and stock-based compensation[83][84][92] Operating Expenses (Three Months Ended June 30) | Expense Category | 2025 | 2024 | Change ($) | Change (%) | | :------------------------------------- | :--------- | :--------- | :--------- | :--------- | | Research and development | $938,277 | $1,131,439 | $(193,162) | -17.1% | | General and administrative | $1,881,447 | $1,540,411 | $341,036 | 22.1% | | Stock-based compensation | $2,125,237 | $1,957,000 | $168,237 | 8.6% | | Total Operating Expenses | $4,944,961 | $4,628,850 | $316,111 | 6.8% | | Interest expense | $160,755 | $— | $160,755 | N/A | | Income tax expense | $264,240 | $144,000 | $120,240 | 83.5% | - General and administrative expenses increased by $341,036 due to pre-commercial and commercial launch activities for LYMPHIR. Research and development expenses decreased by $193,162 due to lower product validation study costs[87][88] - The Company announced distribution agreements with Cardinal Health and Cencora (formerly AmerisourceBergen) in June and July 2025, respectively, in preparation for LYMPHIR's anticipated U.S. commercial launch in the second half of 2025[84][85][86] Nine months ended June 30, 2025 compared with the nine months ended June 30, 2024 This subsection compares the company's financial results for the nine-month periods, detailing changes in net loss and operating expenses - No revenues were generated. Net loss increased by $5,428,914 to $19,764,713, primarily driven by increases in research and development and general and administrative expenses[93][94][100] Operating Expenses (Nine Months Ended June 30) | Expense Category | 2025 | 2024 | Change ($) | Change (%) | | :------------------------------------- | :---------- | :---------- | :---------- | :---------- | | Research and development | $5,342,198 | $3,628,900 | $1,713,298 | 47.2% | | General and administrative | $7,446,753 | $4,443,899 | $3,002,854 | 67.6% | | Stock-based compensation | $6,022,287 | $5,831,000 | $191,287 | 3.3% | | Total Operating Expenses | $18,811,238 | $13,903,799 | $4,907,439 | 35.3% | | Interest expense | $160,755 | $— | $160,755 | N/A | | Income tax expense | $792,720 | $432,000 | $360,720 | 83.5% | - Research and development expenses increased by $1,713,298 due to costs associated with a drug substance batch for manufacturer pre-license inspection. General and administrative expenses rose by $3,002,854 due to pre-commercial and commercial launch activities for LYMPHIR[95][96] LIQUIDITY AND CAPITAL RESOURCES This section discusses the company's cash position, funding needs, and strategies to secure additional capital for ongoing operations and product launch - Citius Oncology incurred a net loss of $19,764,713 for the nine months ended June 30, 2025, with an accumulated deficit of $59,043,300 and negative working capital of approximately $34.7 million, indicating a need for substantial additional financing[102] - Outstanding obligations as of June 30, 2025, include $22.5 million milestone payment to Dr. Reddy's, scheduled payments to Eisai totaling over $9 million, and minimum purchase commitments of approximately $18.3 million for drug substance and $4.5 million for finished drug products[103][108] - Following Citius Pharma's equity offerings and Citius Oncology's $7.44 million net proceeds from its July 2025 public offering, the Company expects sufficient funds through September 2025 but will require additional capital for operations beyond that, including the LYMPHIR launch[105][106][107] Inflation This section addresses the impact of inflation on the company's operations and financial results - Management believes inflation has not had a material effect on the Company's results of operations[109] Off Balance Sheet Arrangements This section confirms the absence of any off-balance sheet arrangements for the company - The Company does not have any off-balance sheet arrangements[110] Critical Accounting Policies and Estimates This section highlights the key accounting policies and estimates that require significant management judgment in preparing financial statements - The preparation of financial statements requires management to make estimates and assumptions, particularly for in-process research and development, stock-based compensation, net realizable value of inventory, and income taxes. Actual results may differ from these estimates[111] - Critical accounting policies and estimates are discussed in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2024[112] Item 3. Quantitative and Qualitative Disclosures About Market Risk. This section states that there are no applicable quantitative and qualitative disclosures about market risk for the Company - This item is not applicable to the Company[113] Item 4. Controls and Procedures. This section details the evaluation of the Company's disclosure controls and procedures and reports on any changes in internal control over financial reporting Evaluation of Disclosure Controls and Procedures This subsection reports on the effectiveness of the company's disclosure controls and procedures as assessed by its executive officers - As of June 30, 2025, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective in ensuring timely and accurate reporting of information required under the Exchange Act[115] Changes In Internal Control Over Financial Reporting This subsection reports on any material changes to the company's internal control over financial reporting during the quarter - There were no changes in the Company's internal control over financial reporting during the quarter ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, its internal control over financial reporting[116] PART II - OTHER INFORMATION Item 1. Legal Proceedings. This section reports on any legal proceedings involving the Company - There are no legal proceedings to report[118] Item 1A. Risk Factors. This section addresses any material changes to the Company's risk factors - There have been no material changes to the Company's risk factors as disclosed in its Annual Report on Form 10-K for the fiscal year ended September 30, 2024, or its Quarterly Report on Form 10-Q for the six months ended March 31, 2025[119] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. This section reports on any unregistered sales of equity securities and the use of proceeds - There are no unregistered sales of equity securities or use of proceeds to report[120] Item 3. Defaults Upon Senior Securities. This section reports on any defaults upon senior securities - There are no defaults upon senior securities to report[121] Item 4. Mine Safety Disclosures. This section provides mine safety disclosures - This item is not applicable to the Company[122] Item 5. Other Information. This section provides other information not covered elsewhere in the report - No directors or officers adopted or terminated any contract or plan for securities purchase/sale during the quarter ended June 30, 2025[123] - On August 17, 2025, the Company issued warrants to a financial advisor to purchase up to 477,273 shares of common stock at an exercise price of $1.65 per share, expiring on August 17, 2030, in a private placement[123] Item 6. Exhibits. This section lists all exhibits filed as part of the Form 10-Q - The exhibits include the Certificate of Amendment to the Certificate of Incorporation, Warrant Agency Agreement, Forms of Common and Placement Agent Warrants, Placement Agency Agreement, Securities Purchase Agreement, and various certifications (31.1, 31.2, 32.1) and XBRL documents[125] SIGNATURES This section provides the official signatures of the company's executive officers, certifying the report's contents - The report was signed on August 12, 2025, by Leonard Mazur, Chief Executive Officer, and Jaime Bartushak, Chief Financial Officer[129]