Citius Pharma(CTXR) - 2022 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION This section provides an overview of the company's financial performance and position, including unaudited financial statements, management's discussion, market risk, and controls Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, changes in stockholders' equity, and cash flows, along with their accompanying notes, for the periods ended March 31, 2022 and 2021. The company reported a significant net loss and negative operating cash flow, leading to a decrease in cash and total assets, while increasing its accumulated deficit Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity as of March 31, 2022, compared to September 30, 2021 Condensed Consolidated Balance Sheet Highlights (March 31, 2022 vs. September 30, 2021) | Metric | March 31, 2022 | September 30, 2021 | Change (YoY) | Percentage Change | | :-------------------------- | :------------- | :----------------- | :----------- | :------------------ | | Cash and cash equivalents | $55,756,232 | $70,072,946 | $(14,316,714) | -20.43% | | Total Current Assets | $58,259,341 | $72,814,350 | $(14,555,009) | -19.99% | | Total Assets | $127,785,970 | $142,429,059 | $(14,643,089) | -10.28% | | Total Current Liabilities | $4,021,923 | $3,982,292 | $39,631 | 0.99% | | Total Liabilities | $9,590,025 | $9,646,326 | $(56,301) | -0.58% | | Accumulated Deficit | $(112,834,095) | $(96,047,821) | $(16,786,274) | 17.48% | | Total Equity | $118,195,945 | $132,782,733 | $(14,586,788) | -10.99% | | Common Stock Outstanding | 146,129,630 | 145,979,429 | 150,201 | 0.10% | Condensed Consolidated Statements of Operations This section outlines the company's revenues, expenses, and net loss for the three and six months ended March 31, 2022 and 2021, highlighting increased operating losses due to rising R&D and G&A expenses Condensed Consolidated Statements of Operations Highlights (Three Months Ended March 31, 2022 vs. 2021) | Metric | 3 Months Ended Mar 31, 2022 | 3 Months Ended Mar 31, 2021 | Change (YoY) | Percentage Change | | :--------------------------- | :-------------------------- | :-------------------------- | :----------- | :------------------ | | Revenues | $— | $— | $— | N/A | | Research and development | $3,452,210 | $1,551,341 | $1,900,869 | 122.53% | | General and administrative | $3,117,417 | $2,293,517 | $823,900 | 35.92% | | Stock-based compensation | $1,020,998 | $342,962 | $678,036 | 197.70% | | Total Operating Expenses | $7,590,625 | $4,187,820 | $3,402,805 | 81.26% | | Operating Loss | $(7,590,625) | $(4,187,820) | $(3,402,805) | 81.26% | | Net Loss | $(7,561,054) | $(4,122,432) | $(3,438,622) | 83.41% | | Net Loss Per Share (Basic & Diluted) | $(0.05) | $(0.04) | $(0.01) | 25.00% | Condensed Consolidated Statements of Operations Highlights (Six Months Ended March 31, 2022 vs. 2021) | Metric | 6 Months Ended Mar 31, 2022 | 6 Months Ended Mar 31, 2021 | Change (YoY) | Percentage Change | | :--------------------------- | :-------------------------- | :-------------------------- | :----------- | :------------------ | | Revenues | $— | $— | $— | N/A | | Research and development | $8,910,059 | $7,742,520 | $1,167,539 | 15.08% | | General and administrative | $6,014,166 | $3,982,181 | $2,031,985 | 51.03% | | Stock-based compensation | $1,925,602 | $619,544 | $1,306,058 | 210.81% | | Total Operating Expenses | $16,849,827 | $12,344,245 | $4,505,582 | 36.50% | | Operating Loss | $(16,849,827) | $(12,344,245) | $(4,505,582) | 36.50% | | Net Loss | $(16,786,274) | $(12,269,341) | $(4,516,933) | 36.81% | | Net Loss Per Share (Basic & Diluted) | $(0.11) | $(0.16) | $0.05 | -31.25% | Condensed Consolidated Statements of Changes in Stockholders' Equity This section details the changes in stockholders' equity, including net loss, stock-based compensation, and common stock issuances, for the six months ended March 31, 2022 - Total Citius Pharmaceuticals, Inc. Stockholders' Equity decreased from $132,182,353 at October 1, 2021, to $117,595,565 at March 31, 2022, primarily due to a net loss of $16,786,274, partially offset by stock-based compensation expense and common stock issuance for services[21] - Common stock outstanding increased from 145,979,429 shares at October 1, 2021, to 146,129,630 shares at March 31, 2022, due to the issuance of common stock for services[21] Condensed Consolidated Statements of Cash Flows This section presents the cash inflows and outflows from operating, investing, and financing activities, showing a significant decrease in cash and cash equivalents for the six months ended March 31, 2022 Condensed Consolidated Statements of Cash Flows Highlights (Six Months Ended March 31, 2022 vs. 2021) | Metric | 6 Months Ended Mar 31, 2022 | 6 Months Ended Mar 31, 2021 | Change (YoY) | Percentage Change | | :-------------------------------------- | :-------------------------- | :-------------------------- | :------------ | :------------------ | | Net Cash Used In Operating Activities | $(14,316,714) | $(13,835,881) | $(480,833) | 3.48% | | Net Cash Provided By Financing Activities | $— | $103,673,295 | $(103,673,295) | -100.00% | | Net Change in Cash and Cash Equivalents | $(14,316,714) | $89,837,414 | $(104,154,128) | -115.94% | | Cash and Cash Equivalents - End of Period | $55,756,232 | $103,697,162 | $(47,940,930) | -46.23% | Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and additional information regarding the company's accounting policies, significant transactions, and financial statement line items - Citius Pharmaceuticals, Inc. is a specialty pharmaceutical company focused on developing and commercializing critical care products, including anti-infectives, unique prescription products, and stem cell therapy[27] - The company's in-process research and development (IPR&D) includes $19.4 million for Mino-Lok (antibiotic solution) and $40 million for I/ONTAK (oncology immunotherapy)[30] - The company reported negative cash flows from operations of $14,316,714 for the six months ended March 31, 2022, and estimates its available cash resources will fund operations through March 2023, necessitating additional capital[40][41] - Key license agreements include Mino-Lok (exclusive worldwide, annual maintenance fee $90,000, royalties mid-single to low double digits), Mino-Wrap (exclusive worldwide, annual maintenance fee $60,000 in 2022, royalties mid- to upper-single digits), NoveCite (exclusive for ARDS, $5 million license fee, up to $51 million in milestones, low double-digit royalties), and I/ONTAK (exclusive for CTCL, $40 million upfront payment, up to $40 million in CTCL development milestones, $70 million for additional indications, and low double-digit tiered royalties)[43][44][46][47][51][53][60][61] Stock-based Compensation Expense | Period | 2022 | 2021 | | :----------------------------------- | :---------- | :---------- | | Three months ended March 31 | $1,020,998 | $342,962 | | Six months ended March 31 | $1,925,602 | $619,544 | - As of March 31, 2022, the company had 40,020,213 warrants outstanding with a weighted average remaining life of 3.3 years, and 53,305,384 common shares reserved for future issuances (stock plan options, future grants, and outstanding warrants)[87][89] 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, detailing revenue, expenses, and net loss for the three and six months ended March 31, 2022 and 2021, along with discussions on liquidity and capital resources. The company continues to incur significant R&D and G&A expenses without generating revenue, leading to increased net losses Historical Background This section outlines the company's evolution as a late-stage biopharmaceutical firm, detailing its acquisitions and primary focus on business planning, R&D, and capital raising since inception - Citius Pharmaceuticals, Inc. is a late-stage biopharmaceutical company focused on developing and commercializing first-in-class critical care products, having acquired Citius Pharmaceuticals, LLC (2014), Leonard-Meron Biosciences, Inc. (2016), and formed NoveCite, Inc. (2020) and Citius Acquisition Corp. (2021)[101] - Through March 31, 2022, the company's efforts have primarily focused on business planning, proprietary technology acquisition, research and development, staffing, and capital raising[102] Patent and Technology License Agreements This section details the company's exclusive worldwide license agreements for key product candidates, including Mino-Lok, Mino-Wrap, ARDS stem cell therapy, and I/ONTAK, outlining associated fees, milestones, and royalties - The company holds an exclusive worldwide license for Mino-Lok® from NAT, involving annual maintenance fees and tiered royalties on net sales, plus milestone payments up to $1.1 million[104] - An exclusive worldwide license for Mino-Wrap from the University of Texas M. D. Anderson Cancer Center requires annual maintenance fees ($60,000 in 2022), up to $2.1 million in milestone payments, and mid- to upper-single digit royalties[106][107] - NoveCite, a subsidiary, holds an exclusive license from Novellus (now Brooklyn ImmunoTherapeutics) for a stem cell therapy for ARDS, involving a $5 million license fee, up to $51 million in milestones, and low double-digit royalties[108][109] - Citius acquired an exclusive license for I/ONTAK (denileukin diftitox) from Dr. Reddy's (originally from Eisai) for CTCL treatment, involving a $40 million upfront payment, up to $40 million in CTCL development milestones, $70 million for additional indications, and low double-digit tiered royalties, with Eisai responsible for completing the current Phase 3 trial[111][113] Results of Operations This section analyzes the company's financial performance, highlighting zero revenue, significant increases in research and development, general and administrative, and stock-based compensation expenses, leading to a substantial rise in net loss for the periods ended March 31, 2022 - The company generated no revenues for the three and six months ended March 31, 2022 and 2021[117][129] Research and Development Expenses (YoY Comparison) | Product/Category | 3 Months Ended Mar 31, 2022 | 3 Months Ended Mar 31, 2021 | Change (YoY) | 6 Months Ended Mar 31, 2022 | 6 Months Ended Mar 31, 2021 | Change (YoY) | | :----------------- | :-------------------------- | :-------------------------- | :----------- | :-------------------------- | :-------------------------- | :----------- | | Mino-Lok® | $906,632 | $1,110,331 | $(203,699) | N/A | N/A | N/A | | Halo-Lido | $703,900 | $242,699 | $461,201 | $1,701,477 | $473,573 | $1,227,904 | | I/ONTAK | $1,582,571 | $— | $1,582,571 | $4,520,366 | $— | $4,520,366 | | ARDS (NoveCite) | N/A | N/A | N/A | $651,753 | $5,383,726 | $(4,731,973) | | Total R&D Expenses | $3,452,210 | $1,551,341 | $1,900,869 | $8,910,059 | $7,742,520 | $1,167,539 | - Research and development expenses are expected to continue increasing in fiscal 2022 due to ongoing Phase 3 trials for Mino-Lok® and I/ONTAK, progression of Halo-Lido, and continued efforts for ARDS and Mino-Wrap[122][136] - General and administrative expenses increased by $823,900 (3 months YoY) and $2,031,985 (6 months YoY) primarily due to additional compensation for new employees, increased investor relations costs, and higher insurance expenses[124][137] - Stock-based compensation expense increased significantly by $678,036 (3 months YoY) and $1,306,058 (6 months YoY), mainly due to new grants to employees, directors, and consultants[125][138] - Net loss increased by $3,438,622 to $7,561,054 for the three months ended March 31, 2022, and by $4,516,933 to $16,786,274 for the six months ended March 31, 2022, driven by higher R&D and G&A expenses[128][141] Liquidity and Capital Resources This section assesses the company's ability to meet its short-term and long-term financial obligations, detailing its accumulated deficit, cash used in operations, and the need for additional capital to fund future operations beyond March 2023 - The company has incurred operating losses since inception, with a net loss of $16,786,274 for the six months ended March 31, 2022, and an accumulated deficit of $112,834,095[144] - Net cash used in operations was $14,316,714 for the six months ended March 31, 2022. Working capital stood at approximately $54,200,000, and cash and cash equivalents were $55,756,232 as of March 31, 2022[144][145] - Current cash resources are expected to fund operations through March 2023, but the company will need to raise additional capital thereafter, with no assurance of availability on acceptable terms[146] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company states that this item is not applicable, indicating no material market risk disclosures are required for the reporting period - This item is not applicable[151] Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of March 31, 2022, concluding they were effective. No material changes in internal control over financial reporting occurred during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2022[153] - There were no changes in internal control over financial reporting during the quarter ended March 31, 2022, that materially affected or are reasonably likely to materially affect internal control over financial reporting[154] PART II - OTHER INFORMATION This section covers non-financial disclosures, including legal proceedings, risk factors, equity sales, defaults, and exhibits, providing additional context to the company's operations and governance Item 1. Legal Proceedings The company reported no legal proceedings for the period - No legal proceedings were reported[157] Item 1A. Risk Factors There have been no changes to the company's risk factors since the Form 10-K filed on December 15, 2021 - There has been no change in the Company's risk factors since the Company's Form 10-K filed with the SEC on December 15, 2021[158] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds On March 21, 2022, the company issued 100,000 shares of common stock to a consultant for investor relations services, exempt from registration under Section 4(a)(2) of the Securities Act - On March 21, 2022, 100,000 shares of common stock were issued to a consultant for investor relations services, exempt from registration under Section 4(a)(2) of the Securities Act[159] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities for the period - No defaults upon senior securities were reported[160] Item 4. Mine Safety Disclosures This item is not applicable to the company - This item is not applicable[161] Item 5. Other Information The company reported no other information for the period - No other information was reported[162] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including employment agreements, certifications of principal officers, and XBRL-related documents - Key exhibits include an Amended and Restated Employment Agreement for Myron Holubiak, certifications from the Principal Executive Officer and Principal Financial Officer, and various Inline XBRL documents[164] SIGNATURES The report is signed by Leonard Mazur, Chief Executive Officer, and Jaime Bartushak, Chief Financial Officer, on May 12, 2022, certifying its submission under the Securities Exchange Act of 1934 - The report was signed by Leonard Mazur (Chief Executive Officer) and Jaime Bartushak (Chief Financial Officer) on May 12, 2022[167]