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Common Stock, Stock Options and Warrants
 12 Months Ended
Sep. 30, 2023
Common Stock, Stock Options and Warrants [Abstract]  
COMMON STOCK, STOCK OPTIONS AND WARRANTS

5. COMMON STOCK, STOCK OPTIONS AND WARRANTS

 

Common Stock Issued for Services

 

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

 

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

 

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

 

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

 

Common Stock Offering

 

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

 

Net proceeds were $13,798,183 after deducting the placement agent fee of $1,050,000, placement agent expenses of $85,000, legal fees of $50,868, and other offering expenses of $15,950. The Company also issued 875,000 warrants to the placement agent at an exercise price of $1.50 per share, that are exercisable six months from the date of issuance, and expire five years from the date of issuance. The estimated fair value of the warrants issued to the placement agent was approximately $771,000.

 

Stock Option Plans

 

Pursuant to our 2014 Stock Incentive Plan, we reserved 866,667 shares of common stock. As of September 30, 2023, there were options to purchase 795,171 shares outstanding, options to purchase 4,829 shares were exercised, options to purchase 66,667 shares expired, and no shares were available for future grants.

 

Pursuant to our 2018 Omnibus Stock Incentive Plan, we reserved 2,000,000 shares of common stock. As of September 30, 2023, there were options to purchase 1,760,000 shares outstanding, options to purchase 116,667 shares were exercised, options to purchase 13,333 shares expired, and the remaining 110,000 shares were transferred to the 2020 Omnibus Stock Incentive Plan (“2020 Plan”).

 

Pursuant to our 2020 Plan, we reserved 3,110,000 shares of common stock. As of September 30, 2023, there were options to purchase 1,820,000 shares outstanding, options to purchase 50,000 shares expired and the remaining 1,240,000 shares were transferred to the 2021 Omnibus Stock Incentive Plan (“2021 Stock Plan”).

 

Pursuant to our 2021 Stock Plan, we reserved 8,740,000 shares of common stock. As of September 30, 2023, options to purchase 8,630,000 shares were outstanding, options to purchase 75,000 shares expired and the remaining 35,000 shares were transferred to the 2023 Omnibus Stock Incentive Plan (“2023 Stock Plan”).

 

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

 

The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model. Volatility is estimated using the trading activity of our common stock. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant commensurate with the expected term assumption. The expected term of stock options granted to employees and directors, all of which qualify as “plain vanilla,” is based on the average of the contractual term (generally 10 years) and the vesting period. For non-employee options, the expected term is the contractual term.

 

The following assumptions were used in determining the fair value of stock option grants for the years ended September 30, 2023 and 2022:

 

   2023   2022 
Risk-free interest rate   3.52 – 4.14%    1.05 – 2.94% 
Expected dividend yield   0.00%   0.00%
Expected term   5.50 – 10 years    6.50 – 10 years 
Expected volatility   89 – 90%   94 – 110%

 

A summary of option activity under the Citius Pharma plans (excluding the NoveCite and Citius Oncology Stock Plans) is presented below:

 

   Option
Shares		   Weighted-
Average
Exercise
Price		   Weighted-
Average
Remaining
Contractual
Term		  Aggregate
Intrinsic
Value		 
Outstanding at September 30, 2022   9,400,171   $2.07   7.81 years  $869,509 
Granted   4,150,000    1.26         
Exercised   (46,667)   0.67       34,067 
Forfeited or expired   (198,333)   3.91         
Outstanding at September 30, 2023   13,305,171   $1.79   7.41 years  $56,203 
                   
Exercisable at September 30, 2023   6,558,507   $2.09   6.19 years  $56,203 

 

The weighted average grant date fair value of the options granted during the year ended September 30, 2022 was estimated at $1.67 per share. All these options vest over terms of 12 to 36 months and have a term of 10 years.

 

The weighted average grant date fair value of the options granted during the year ended September 30, 2023 was estimated at $0.98 per share. All these options vest over terms of 12 to 36 months and have a term of 10 years.

 

Stock-based compensation expense for the years ended September 30, 2023 and 2022 was $6,616,705 (including $130,382 for the NoveCite plan and $1,965,500 for the Citius Oncology plan) and $3,905,954 (including $133,332 for the NoveCite plan), respectively.

 

At September 30, 2023, unrecognized total compensation cost related to unvested awards under the Citius stock plans of $4,840,874 is expected to be recognized over a weighted average period of 1.53 years.

 

NoveCite Stock Plan – Under the NoveCite Stock Plan, we reserved 2,000,000 common shares of NoveCite. As of September 30, 2023, there were options outstanding to purchase 1,911,500 common shares of NoveCite and 88,500 common shares of NoveCite available for future grants.

 

During the year ended September 30, 2021, NoveCite granted options to purchase 2,000,000 common shares to employees at a weighted average exercise price of $0.24 per share, of which options to purchase 88,500 common shares were forfeited, and options to purchase 1,673,625 common shares were exercisable as of September 30, 2023. These options vest over 36 months and have a term of 10 years. The weighted average remaining contractual term of options outstanding under the NoveCite Stock Plan is 7.39 years. No options were issued in fiscal years 2023 and 2022. At September 30, 2023, unrecognized total compensation cost related to unvested awards under the NoveCite Stock Plan of $47,575 is expected to be recognized over a weighted average period of 0.67 years.

 

Citius Oncology Stock Plan - Under the Citius Oncology Stock Plan, adopted on April 29, 2023, we reserved 15,000,000 common shares of Citius Oncology. The Citius Oncology Stock Plan provides incentives to employees, directors, and consultants through grants of options, SARs, dividend equivalent rights, restricted stock, restricted stock units, or other rights.

 

During the year ended September 30, 2023, Citius Oncology granted options to purchase 12,750,000 common shares at a weighted average price of $2.15 per share, of which options to purchase 150,000 common shares were forfeited and options to purchase 655,556 common shares were exercisable at September 30, 2023. The weighted average grant date fair value of the options granted during the year ended September 30, 2023 was estimated at $1.65 per share. These options vest over periods from 12 to 36 months and have a term of 10 years. The weighted average remaining contractual term of options outstanding under the Citius Oncology Stock Plan is 9.77 years. At September 30, 2023, unrecognized total compensation cost related to unvested awards under the Citius Oncology Stock Plan of $18,882,500 is expected to be recognized over a weighted average period of 2.64 years.

 

Warrants

 

The Company has reserved 50,923,819 shares of common stock for the exercise of outstanding warrants. The following table summarizes the warrants outstanding at September 30, 2023:

 

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

 

On August 8, 2023, we extended the term by one year to August 14, 2024 for 3,921,569 warrants for common stock with an exercise price of $1.15 per share and extended the term by one year to August 8, 2024 for 189,412 warrants with an exercise price of $1.59 per share. We recorded a deemed dividend of $1,151,208 based on the excess of the fair value of the modified warrants over the fair value of the warrants before the modification, the effect of which was an increase in the net loss attributable to common shareholders in the statement of operations for the year ended September 30, 2023.

 

At September 30, 2023, the weighted average remaining life of the outstanding warrants is 2.72 years, all warrants are exercisable, and there was no aggregate intrinsic value for the warrants outstanding.

 

Common Stock Reserved

 

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

 

Stock plan options outstanding   13,305,171 
Stock plan shares available for future grants   11,735,000 
Warrants outstanding   50,923,819 
Total   75,963,990